Chapter 13: What Separates This Form Of Bankruptcy From The Rest

If you are considering declaring bankruptcy, you have several options, including chapter 13. Before you make a decision, you should talk to your lawyer to find out what may be best for you. However, having an idea of what separates this type of bankruptcy from the rest is helpful.

Chapter 13 is usually considered a restructuring of your debts. In most cases, you will reorganize your finances, eventually paying back at least some creditors, but under new terms. This means you may be able to pay less than you owe, or receive a lower interest rate, and be cleared of your liabilities.

Many people who have some money to pay back their debts choose to go this route, and many creditors are somewhat grateful for chapter 13 compared to other types since they will at least get a portion of what they are owed.

You will first go over your finances with your lawyer, deciding how much money you will have to pay the companies you owe. He or she will draw up a comprehensive payment plan, listing all the regulations that both you and the creditors must adhere to.

You typically have to start paying about thirty days after the case begins, and you have up to five years to pay off your liabilities. The companies being repaid cannot attempt to get more money from you during this time, as you will usually be paying just a portion of what you owe.

Some creditors refuse to agree to a payment plan, since they want the full portion of what is owed to them. However, if they do not agree to such a plan, they may not recover any money since you often have the option to pursue a type of bankruptcy that does not involve paying back any anyone.

Therefore, it is often in their best interest to accept it. Usually, even if they disagree, the court may approve the plan so that you can begin repaying. However, most courts allow those you owe to file an objection, as well.

Once you have paid off all the debt involved in your payment plan, you will usually be given a full discharge. It will take some time for this to stop affecting your credit score, but potential new creditors may see that you took the chapter 13 route, which means you still paid back much of what you owed despite financial hardship. It is not right for everyone, though, so be sure to consult a lawyer before you begin reorganizing your debts.