If you are struggling financially, you may consider filing for bankruptcy. It is never an easy decision to make, as bankruptcy is a drastic move. However, the result can be that you're finally back on financial track and the opportunity for a fresh new start. This article will give you a good idea on how Chapter 13 bankruptcy works and what you need to know before taking the next step.
Retain Your Assets
One of the biggest advantages to filing for Chapter 13 bankruptcy is the fact that you can hang onto your assets. Unlike Chapter 7, whichh as individuals needing to sell off valuable assets in order to pay off their debts, Chapter 13 allows for those filing for bankruptcy to keep their valuable assets. The reason is because with a Chapter 13 filing, the individual uses their monthly income to pay off their debt.
One of the biggest reasons people turn to Chapter 13 is because they may be in severe jeopardy of losing their home, and Chapter 13 allows the individual to avoid foreclosure, because in Chapter 13 bankruptcy, the homeowner has the opportunity to make up the payments they are behind. You cannot do this in Chapter 7 bankruptcy.
You Want to Pay Your Debt
When you file for Chapter 7, you sell off your valuable assets in order to pay your debt. In Chapter 13, you are using your disposable income to pay off your debt. Many individuals have a strong desire to do the right thing by paying off their debt, and Chapter 13 allows for you to do just that.
Chapter 13 is all about rehabilitating yourself because you are making every effort to pay off your debt. Creditors that are involved with a Chapter 13 bear high risk, because they are only able to collect a few pennies on the dollar. But if Chapter 13 seems too difficult for you, you can always convert to a Chapter 7 if you qualify.
How It Works
When you file for Chapter 13, you will work with the bankruptcy trustee to come up with an agreed upon payment plan. This payment plan can be anywhere from three to five years. At the end of your completion of the plan, you will be required to take consumer counseling classes in order for you to have a better understanding on how credit and financing work. For more information, speak with experts like Brent Sorenson & Associates, P.C.Share