Some Facts About Chapter 13 Bankruptcy

If you are considering filing for bankruptcy to escape the burden of your growing and unmanageable debts you should first talk to a lawyer that specializes in bankruptcy law to help you determine if you are a good candidate for bankruptcy and if so, which bankruptcy type is your best option.

When you file for bankruptcy protection with the court, all garnishments and collection efforts from your creditors must cease. This is called a stay and any creditor that violates it faces stiff penalties.

Regardless of which type of bankruptcy relief you ultimately file for there are a few similarities. Both will require you to file a petition with the federal court listing all of your debts, income, assets and liabilities. There is a fee to file the petition with the court and the documents are usually quite complex and not something you should undertake without legal guidance.

Thirty percent of all bankruptcy filings are for Chapter 13 bankruptcy, which essentially sets up a repayment plan over the course of the next three to five years to allows you to repay your creditors with a more favorable payment plan.

Once you file a repayment plan with the court you must begin making payments within thirty days, even if the court has not approved the plan yet. If you miss even one payment, the repayment plan can be reconfigured to a five year repayment plan, the longest the court will extend it- or the more likely scenario- your repayment plan will become null and void and you will be forced to re file bankruptcy.

There are a few advantages to a chapter 13 bankruptcy over a chapter 7. With a chapter 13 repayment plan you will get to keep all of your property and assets instead of being forced to sell them. With a chapter 7 filing, any assets of value are sold to repay as much to your creditors as possible, and the courts then erase the balance. If you have assets to protect and the ability to stick to a strict repayment schedule, this type of filing may work for you to recover from your financial hiccups.

Another advantage to chapter 13 is the fact that some credit reporting agencies will erase a chapter 13 filing off your credit after seven years instead of the ten years that a chapter 7 remains on your credit report. This is good news to help you rebuild your damaged credit, assuming you don’t run into any more financial problems down the road to recovery.

In order to qualify for chapter 13 bankruptcy though you must show that you have an adequate and steady income. It is strictly up to the court’s discretion to grant you a chapter 13 filing and if you are denied you may have to consider a chapter 7 filing for relief.