Bankruptcy is a means by which overwhelmed individuals and businesses can seek financial forgiveness. In order to protect the interests of companies that extend credit, the federal government has certain rules and restrictions in place regarding bankruptcy.
Chapter 7 bankruptcy, which offers a discharge of unsecured debt has strict caps on income levels and the value of total assets owned. Chapter 13 bankruptcy, on the other hand, is available to anyone with overwhelming debt, regardless of the total value of their assets or their current income.
Chapter 13 bankruptcy helps make your existing debt more manageable
Unlike Chapter 7 bankruptcy, which often requires the liquidation of assets, Chapter 13 bankruptcy does not offer an immediate discharge. Instead, individuals and businesses filing for Chapter 13 bankruptcy have to ask for payment plans for anywhere from three to five years.
During this time, they make one monthly payment to the courts that the courts then disperse to various creditors. Because of the repayment plan and the fact that Chapter 13 bankruptcy is available to those making significant wages, some people refer to this form of bankruptcy as a wage earner's plan.
Chapter 13 proceedings can help working professionals
There are many benefits to Chapter 13 bankruptcy, including both the immediate relief from collection activity via the automatic stay and the ability to make your existing debts more manageable.
After discharge, the record of the bankruptcy will only appear on your credit report for seven years, instead of 10 as in Chapter 7 proceedings. If you make too much to qualify for Chapter 7 bankruptcy, it may be time to consider Chapter 13 bankruptcy.