Chapter 13 Bankruptcy Overview: Part 1
Most individuals facing debt issues would rather opt for Chapter 7 bankruptcy, which allows them to eliminate their debt within four months without reimbursing their creditors. However, not everyone is eligible for this option. Those with substantial income or who wish to retain valuable assets typically seek assistance through Chapter 13 bankruptcy.
Here, we’re sharing some of the basics of Chapter 13 bankruptcy that you should know about:
Why You Should Consider Filing for Chapter 13 Bankruptcy
Here are a number of reasons you should consider filing for Chapter 13 Bankruptcy:
- Keep your assets: Unlike Chapter 7 bankruptcy, Chapter 13 Bankruptcy lets you keep your assets as you work to pay off your debts. You can keep your home, car, and other valuable possessions. You will have to make payments to creditors over three to five years, but you can keep your property.
- Stop foreclosure: If you are behind on your mortgage payments and facing foreclosure, filing for Chapter 13 bankruptcy can stop the foreclosure process. You can catch up on past-due payments over time while continuing to make your regular mortgage payments.
- Reduce interest rates and fees: Chapter 13 bankruptcy can also help reduce interest rates and fees on your debts. This can make your monthly payments more affordable and help you pay your debts faster.
- Protect co-signers: If you have a co-signer on your debts, Chapter 13 bankruptcy can protect them from being pursued by creditors. Your co-signer will not be responsible for your obligations as long as you make your Chapter 13 payments as scheduled.
- Improve credit score: Although filing for bankruptcy can initially lower your credit score, Chapter 13 bankruptcy can significantly improve it over time. This is because you will make regular payments to your creditors, showing that you are responsible for your finances.
The Process of Chapter 13 Bankruptcy
The Chapter 13 bankruptcy filing process involves several steps, including:
1. Credit Counseling
Before filing for Chapter 13 bankruptcy, you need to complete a credit counseling program from an approved agency. This course will help you understand your financial situation and determine whether bankruptcy is right.
2. Filing the Petition
Once you have completed credit counseling, you can petition Chapter 13 bankruptcy with the bankruptcy court. You must provide information about your debts, assets, income, and expenses.
3. Creating a Repayment Plan
After filing a petition, you will work with your bankruptcy trustee to create a repayment plan. This plan will outline how you will pay off your debts over three to five years.
4. Creditors Meeting
You will attend a creditors meeting, also known as a 341 meeting, where you will meet with your trustee and any creditors who wish to attend. You will be asked specific questions regarding your finances and your repayment plan.
5. Confirmation Hearing
After the creditors’ meeting, there will be a confirmation hearing where a judge will review your repayment plan and either approve or deny it. If your plan is approved, you can begin paying your trustee.
6. Making Payments
You will make monthly payments to your trustee, who will handle the distribution of funds to your creditors according to your repayment plan. You must make these payments on time and in full to complete your Chapter 13 bankruptcy.
Once you have completed your repayment plan, any remaining eligible debts will be discharged. This means you will no longer be responsible for these debts and can receive a fresh start to your financial future.
Embrace a Brighter Financial Future with Chapter 13 Bankruptcy and Expert Legal Guidance
Overall, the process of Chapter 13 bankruptcy can take several months to complete and requires careful planning and budgeting. However, it can provide a way to reorganize your debts and create a more manageable repayment plan while also protecting your assets and providing a fresh start to your financial future. A bankruptcy attorney can help you navigate this complex process.
Angela R. Owens is a skilled bankruptcy attorney who provides expert legal services to clients in Plano, Allen, Frisco, Dallas, and nearby areas. Schedule an appointment today with our bankruptcy lawyer!