Chapter 13 can be an ideal way to repay your debt. Find out what the good and the bad is about it before you decide to file.
The decision to file any type of bankruptcy is hard. Chapter 13 can even be harder. It takes time to work through this process. You will need to tell your boss about it,
too, in some states since the monthly payment needs to come right out of your package and to the court. What is worse, not everyone can file this type of case, especially if you do not have income. However, this is a good option for many people. If it is a good option for you, you can count on it providing you with financial relief in the long term.
The Time Factor
One of the first things to consider about Chapter 13 is that it can take between three and five years to complete. With this type of bankruptcy, you will pay a certain amount of money for a set amount of time. During that time, you will be need to be certain that you have income to repay this debt. In short, the amount you repay is dependent on what you owe, as well as what your expenses are. Your attorney will help you to determine what the amount is likely to be.
Do You Have Income?
In order to process this type of bankruptcy, you will need to have income. You also need to have enough income to have discretionary income. Discretionary income is extra money each month after paying for your needed items, like loans and utilities. That amount needs to be enough to repay at least one percent of most of your unsecured debt, and enough to pay back car loans or other types of debts. While your mortgage payment will not be included in this monthly payment, your car loan, student loans, and tax debts will be.
Limited Budget
Another factor to consider about Chapter 13 is that it does lead to living for three to five years on a limited budget. In other words, any extra money you have, should be put towards paying off your debt.
The Key Benefits
These things may sound limiting, but in fact this form of bankruptcy does offer some ideal benefits, too.
• Your assets remain protected. If you have a loan on them, you will need to maintain that loan.
• You will be able to work to rebuild your credit after this period. You may find it easier to do so than filing Chapter 7.
• The process will likely lead to forgiving most of your unsecured debt. The amount you pay back is dependent on the amount of discretionary income you have.
• In all cases, it stops creditors from coming after you. It also stops people from filing claims against you.
For many people Chapter 13 is the route to take. Each situation is unique, though. Determine what your specific needs are here to ensure that you have the best possible way to overcome your financial struggles. If this is the method you should take, do so.
