Becoming financially strapped can take its toll. The decision to file bankruptcy is not easily made, Once you decide to file, you will need to know what chapter best covers your case. Chapters 7 and 13 are the most common. Chapter 7 bankruptcy wipes away all of your debt and basically gives you a fresh start. A Chapter 13 bankruptcy allows you to keep your property and gives you an opportunity to repay the majority of the debt.
*Reorganization – Chapter 13 bankruptcies are often called reorganization plans because they allow individuals to reorganize or restructure your debt. The bankruptcy court will help you set up a payment plan giving each of your debts a specific level of priority. They will evaluate your income and determine an agreeable amount of time for you to have your debts paid off.
*Repayment Plan – Your repayment plan will be determined on the amount of your debt in comparison to the amount of your income. A repayment plan will be developed that allows you to make your current monthly financial obligations as well as make ordered payments to creditors listed within the bankruptcy. Each credit is listed in order of their priority and what their estimated payment will be.
*Retain possession of Your Property – A Chapter 13 bankruptcy will allow you to retain possession of your personal property. Unlike a Chapter 7 bankruptcy where you may be required to return the property or sell it to pay off extensive amounts of debt, Under a 13, the individual continues making payments on the property, the only difference being the amount being paid and the duration.
*Priority Debts – Priority debts are those given the highest ranking during the bankruptcy. A priority debt is one that is paid back in full. Car loans and mortgages are examples of priority debts. While the full amount is due and owing, the payment arrangements may be altered to make repayment easier. For debts that are not deemed to be a priority, only a portion of the total amount owed is paid back.
*Length of Time – When restructuring a person’s finances, the length of time a person has to pay back the monies owed will vary depending on how much is owed and their income. The bankruptcy trustee will determine how long it will take to repay the amount of money, the person filing will be responsible for. Once that has been decided, they will set a specific amount of time, normally 3 to 5 years, for the loans to be repaid.
A person choosing to file Chapter 13 bankruptcy must be willing to follow the bankruptcy trustee’s recommendations and reorganization schedule. In return for willingly paying off their debts, they are allowed to keep their property and begin rebuilding their credit almost immediately.