Chapter 13 bankruptcy is a form of personal bankruptcy available to most individuals who are struggling with overwhelming debt. This process provides an opportunity to reorganize their debts and to pay them down in manageable installments over a specific period of time.
Chapter 13 bankruptcy is often a particularly attractive option for homeowners who are risking foreclosure. The length of the repayment plan period allows many homeowners the flexibility to seek solutions that will ultimately save their homes.
Crafting a repayment plan
One of the key features of Chapter 13 bankruptcy is the creation of a repayment plan. The debtor works with a bankruptcy trustee to develop a plan that outlines how they will repay their creditors (at least, in part) over three to five years. The repayment plan takes into account the debtor’s income, living expenses and the amount of debt owed. As a result, the debtor’s repayment obligations are structured to be truly manageable.
Once approved, the debtor makes monthly payments to the bankruptcy trustee assigned to their case, who then distributes the funds to the creditors according to the terms of the plan.
Benefits of the process
Chapter 13 bankruptcy offers several benefits worth considering if you are struggling with debt. For example, upon successful completion of their repayment plan, a Chapter 13 bankruptcy debtor may be eligible for a discharge of their remaining qualifying debts. This means that the debtor will no longer be legally obligated to repay those debts.
Additionally, filing for Chapter 13 bankruptcy initiates an automatic stay, which halts most creditor actions, including collection efforts, lawsuits and wage garnishments. This gives debtors a chance to resolve their financial difficulties without experiencing constant pressure from creditors.
Chapter 13 bankruptcy offers individuals with regular income a viable path to regain control of their finances. If you think that this opportunity might benefit you and your family, don’t hesitate to seek legal guidance to explore your options.