Bankruptcy may seem like a bad word, but it exists to help us resolve financial difficulty. When debts are extreme and it seems there is no way out, a successful bankruptcy filing is often the first step on the road to recovery.
Chapter 7 bankruptcy is a common way to get rid of debt that is unrecoverable. While this method usually applies to people who do not think they can repay debts at all, there is another option favored by people who do not wish to liquidate their assets, another option exists: Chapter 13.
What is Chapter 13 bankruptcy?
A Chapter 13 bankruptcy, also called a "wage earner's plan," is a plan to repay all or most debts while the debtor's income remains steady. Debtors have the option of presenting creditors with a repayment plan over the following three to five years.
What are the advantages of Chapter 13?
The biggest advantage is that important assets, such as homes and required vehicles, are safe from seizure or sale. Although debtors remain liable for mortgage payments or other loan service, a house cannot be foreclosed upon by the lender. The process may also lower upcoming payments to make them more manageable.
How are debtors eligible for Chapter 13?
Any working person with less than $394,725 in unsecured debts and less than $1,184,200 in secured debt may apply for Chapter 13 bankruptcy protection. A person is excluded within six months of a previous bankruptcy attempt ending due to failure to appear or dismissal. An attorney may help debtors determine if Chapter 13 bankruptcy is the right choice.
Source: United States Courts, "Chapter 13 -Bankruptcy Basics," accessed April 20, 2018