You file for Chapter 13 bankruptcy and get a five-year repayment plan. It's based around your current income and your budget basically allocates everything that you have toward paying your necessary expenses or paying into that repayment plan. You don't worry about investing because you just want to eliminate that debt.
Chapter 7 bankruptcy discharges your debt, while Chapter 13 bankruptcy creates a repayment plan. So, if you're weighing your two options -- assuming you're eligible, as some people are only eligible for one and not the other -- why would you choose Chapter 13?
If you're thinking of filing for Chapter 13 bankruptcy, you may have a high amount of credit card debt. Perhaps you lost your job and you were forced to put everything on the cards just to get by. Now you have a new job and a regular income, which is why you're interested in using the repayment plan, rather than liquidation. The credit card debt is too much to pay all at once, but do you have to pay all of it eventually under the new plan?
As a homeowner, you know that you have a variety of obligations with regard to your finances. For example, you have to make your mortgage payment every month. Along with this, you have tax and insurance obligations.
If you're declaring Chapter 13 bankruptcy, you're trying to set up a repayment plan that basically spreads most of your debt out and makes it more affordable for you. To do this, the court needs to see four key pieces of information:
For most of us, debt problems begin with credit cards. If we lose our jobs or have a health problem or get divorced, we turn to our credit cards "just temporarily."
Many people will confront some serious financial problems at some point in their lives. When these tough times do arrive, the most important thing that the individual can do is to remain calm. Panicking and "burying your head in the sand" is the worst way to handle financial problems. Ignoring the problem will not make it go away. You have to appropriately address your debts in a way that allows you to move on at a later date.