Understanding Bankruptcy II: Chapter 13
In our most recent blog post, we discussed the requirements for and benefits of filing a Chapter 7 bankruptcy. However, Chapter 7 bankruptcies are not the only type of bankruptcies that can be filed by consumers who are financially hard-pressed. In addition to the Chapter 7, debtors may also file for Chapter 13 relief.
Typically, Chapter 13 bankruptcies are for debtors who, though unable to pay all of their debts, earn or make too much money to qualify for a Chapter 7 bankruptcy plan. For this reason, Chapter 13 cases are akin to a financial reorganization that allows you to pay-off your debts over the course of three (3) to five (5) years.
Debtors in a Chapter 13 case are allowed to keep all of their property. In exchange, the debtor has to pay back at least a portion of his or her debts during the course of their case. Rather than make several payments to multiple creditors, the debtor will make one payment every month to the trustee who will then distribute this money to your creditors. At the end of the 3 to 5-year period set-forth in your bankruptcy plan, any unsecured debts that have not been fully paid will be discharged, similar to a Chapter 7 plan.
Often times, homeowners who have fallen behind on their mortgages use Chapter 13 bankruptcy plans. To avoid foreclosure, a Chapter 13 case allows a homeowner to catch up on the missed payments over a period of time. You will still be required to pay regular monthly mortgage payments, but the bankruptcy case will create a “stay” in the foreclosure proceedings, effectively preventing your mortgage lender from moving forward with foreclosure.
Filing for bankruptcy is an important decision that should be discussed with a knowledgeable debtor rights attorney. Though bankruptcy can help your credit in the long run, your credit score will take an initial hit. Chapter 13 bankruptcies will stay on your credit report for 7 years.
Due to the varying types of bankruptcy options available to you and the fact that federal courts strictly enforce the bankruptcy rules, you need the help of an experienced debtor rights attorney—like those at Fitzgerald Campbell—if you are considering filing for bankruptcy or have already done so. Our attorneys have decades of experience representing clients in bankruptcy and all other types of debtor defense cases, and we are here to help you!
Call us today for a free consultation at (866) 927-8289, or email us at firstname.lastname@example.org.