When one considers filing for bankruptcy, there may be countless factors at play - how it will affect your future, your family and your current lifestyle. Out of different types of bankruptcies, Chapter 13 may be appealing to those who hope to keep their daily habits intact. What is Chapter 13, and how can it help relieve your debt? Here's a short overview to help you make your decision.
Chapter 13 Bankruptcy is a means by which to repay your debts over time, at lower or no interest rates. It works as a reorganization of your debts, forming a schedule that allows you to use future income to pay off creditors. Thus, Chapter 13 best applies to those with steady employment, who will be able to settle their overdue payments over a span of five years. In the meantime, you get to keep your assets; this may be ideal for families with children, who otherwise could be negatively affected by the parents' debt.
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During Chapter 13, a written plan details the amounts that will be paid over a span of time, and when they will be paid. This repayment must begin with a month to forty-five days of the bankruptcy being granted by the court. Chapter 13 can be pursued without the agreement of any creditors, who are prohibited by the court from making attempts to collect the debt.
So, how does one file? The process begins with, of course, determining whether Chapter 13 is the best solution for you right now. The next step is to create a budget plan, one you know you'll be able to stick to until the debts are paid in full. Once you've created a feasible plan, you must fill out the proper application forms, pay the filing fee, and attend any required meetings with the judge or creditors.
A debtor is also entitled to a discharge of debts, provided three requirements have been met. The first is that all child support or alimony payments have been made. The second regards prior bankruptcy discharges, and how long ago the debtor had been granted one. The third requires that the debtor finish an approved course in financial management.
In the event that a Chapter 13 debtor cannot continue to pay according to the plan, they may also apply for a 'hardship discharge.' This usually only occurs when the circumstances leading to it are outside of the debtor's control, and the creditors have received an amount equal to that which could have been gathered from a Chapter 7 liquidation.
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