It can feel overwhelming to go through bankruptcy. You're often left wondering about what assets you'll be able to hold onto and how long it will take to be finished with the bankruptcy process. That's why it helps to have an overview of bankruptcy, such as Chapter 13 bankruptcy, so that you know what to expect.
How Does Chapter 13 Bankruptcy Work?
What makes Chapter 13 a different form of bankruptcy is that you are essentially proposing what your debt repayment plan will be to your local court. This plan includes detailed information about how you will make payments to a bankruptcy trustee and how those payments will be distributed to qualified creditors over a set period of time. The court then must approve the plan, which is done by determining that the plan was made in good faith and follows the bankruptcy code.
What Is The Repayment Period?
If your plan is approved, you will enter the repayment period of Chapter 13 bankruptcy. During this time, your creditors are not allowed to contact you about the money that they are owed. They are only entitled to being paid back what was approved by the court under the bankruptcy plan. You'll still hold onto your non-exempt assets, such as a vacation home or jewelry, during this repayment period. However, you must maintain regular payments according to the monthly repayment plan in order to keep your assets.
Will All Debts Be Discharged?
Your Chapter 13 bankruptcy will include secured and unsecured debts. A secured debt is something like a home or a vehicle that has not been paid off yet, and you may have fallen behind on payments. You must continue to make regular payments on these debts, but the missed months can be included in your debt repayment plan.
Unsecured debts, such as credit card and medical bills, can be discharged as part of Chapter 13 bankruptcy, but there are some catches as to how it works. You typically end up paying what you can afford towards your unsecured debts, which means that creditors will likely not receive everything that they are owed. How much of the debts make their way into the repayment plan will depend on your income level and how much money you have left after monthly obligations are paid for.
Reach out to a bankruptcy lawyer to find out more information on Chapter 13 bankruptcy and how it impacts your situation.Share