When you’re in debt and feeling overwhelmed, filing for bankruptcy might seem the only option. But knowing what type of bankruptcy to file—Chapter 7, 11, or 13—can be confusing. Here, we’re discussing why you may want to consider filing Chapter 13 Bankruptcy.
What is Chapter 13 Bankruptcy?
First things first, let’s define what exactly Chapter 13 Bankruptcy entails. Unlike a Chapter 7 or 11 bankruptcy which seeks to absolve debt completely in exchange for the liquidation of assets and/or reorganization of business debts respectively, a Chapter 13 Bankruptcy provides an individual with the opportunity to restructure their debt into a more manageable repayment plan over three to five years. During this time period, creditors are unable to pursue legal action against the debtor until the chapter is completed.
How Does it Work?
The process begins when your chapter 13 bankruptcy lawyer submits a repayment plan proposal on your behalf that outlines how all debts will be paid off over the course of several years. Typically, this plan should include details such as the amount and frequency of payments made during the repayment period; a proposed timeline for payment completion; information about secured and unsecured debt; and any additional fees associated with filing for bankruptcy. The proposal is then evaluated by creditors who can either approve or reject it depending on whether they deem it feasible. If approved, creditors become legally bound by its terms and must abide by them throughout the duration of the repayment period until all debts have been paid off in full.
What Are the Benefits?
One of the main benefits of filing Chapter 13 Bankruptcy is that it allows individuals to keep certain assets—such as their home or vehicle—that they would otherwise risk losing if they were to pursue another form of bankruptcy such as Chapter 7 or 11.
Additionally, this type of bankruptcy also enables individuals facing foreclosure or repossession to stay current on their payments while restructuring their debt without any additional legal action taken against them during this time frame.
Lastly, since there are no limits on how much debt can be included in a repayment plan unlike other forms of bankruptcy, individuals have greater flexibility in terms of how much money they are able to pay back each month over their designated repayment period without having any money remaining after reaching completion status at its end date.
Advantages & Disadvantages
There are both advantages and disadvantages associated with filing for Chapter 13 Bankruptcy. On the one hand, filing for Chapter 13 gives you more time to repay your debt while also allowing some debts (such as past-due mortgage payments) that wouldn’t be discharged through other types of bankruptcy filings like Chapter 7s or 11s).
However, this type of bankruptcy does not allow you to discharge certain types of debt (like student loans) which may not be ideal depending on your financial situation. Additionally, since this type of filing requires regular payments over several years it may not be feasible for everyone depending on their current income levels or other financial obligations they may have.
Filing for Chapter 13 Bankruptcy can be an invaluable tool for those struggling with large amounts of debt who need some extra help getting back on track financially but don’t want to risk losing certain assets in exchange for doing so. While it’s important to consult an attorney before making any decisions regarding your financial situation, understanding what type of bankruptcy you’re eligible for can give you peace of mind knowing there are options out there if needed. Hopefully, this guide has provided insight into why pursuing chapter 13 may be beneficial for your specific case! All said and done we wish you all success in navigating through these waters! Good luck!
This article was written by Dixie Somers, a freelance writer who loves to write about business, finance, and family issues. She lives in Arizona with her husband and three beautiful daughters. You can find Dixie on Facebook.
