How Chapter 13 Bankruptcy Works
Posted on: 13 February 2020
There are times in life when a person's finances might get out of control. If you are in a time like this and do not know what to do, you might want to consider Chapter 13 bankruptcy. This is a great option for people who earn good incomes but that are strapped with debts and facing foreclosure or other major problems like this. Here are several things to understand about how Chapter 13 works to help people get out of the financial problems they are currently stuck in.
Chapter 13 Offers an Automatic Stay
A major source of relief you can experience from filing Chapter 13 is the automatic stay the court issues. This is an order of the court that stops creditors from trying to collect the money you owe them, and it also stops certain legal processes, such as wage garnishment, foreclosure, and repossession. While the automatic stay does not do anything for your debts, it does give you relief from creditor harassment. It also gives you time to work out the details of your case.
Chapter 13 Requires a Payment Plan
Chapter 13 bankruptcy is not a quick process by any means. In fact, it will probably take you five years to finish your case, and this is mainly because you will spend this time repaying your debts through a repayment plan established by your lawyer and the court. The purpose of the plan is to give you time to repay all the debts that you need to repay so you are no longer in a bad financial position. At the end of the period, you should be in much better financial shape than you were prior to starting the plan.
Chapter 13 Might Offer a Discharge at the End
The third important thing to know is that there is a chance that your Chapter 13 plan will offer a discharge of debt at the end of your plan. This only happens with debts that are not considered priority debts, though, and it does not take place until you successfully finish making every payment in your Chapter 13 plan. An example of a debt that may qualify for a discharge is a credit card bill you owe. If your plan did not repay this debt in full, the trustee might forgive the remaining balance after you complete the plan.
If you have questions about Chapter 13 or other options that could possibly benefit you, meet with a Chapter 13 bankruptcy lawyer to learn more.
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