The term “bankruptcy” is likely one that many are familiar with. Those individuals may not be aware of what filing for bankruptcy entails however. For example, there are different chapters under which a consumer might file. One of those is Chapter 13.
In a Chapter 13 filing debt is not immediately discharged. Instead, consumers enter into a repayment plan that can last between three and five years. In the course of the repayment plan, which is overseen by a bankruptcy trustee who is court-appointed, creditors receive payments on the debt owed. The trustee is usually responsible for disbursing those payments to the creditors after first collecting it from the debtor. At the end of the process, any qualifying remaining debt is discharged.
This chapter is not always appealing to filers. This is because of the length of time it usually takes. For people considered “financially fragile,” this can be problematic. Sometimes they are unable to complete the process and end up converting to a Chapter 7 bankruptcy instead.
Others find it beneficial to file under Chapter 13 because it allows them to keep their assets such as homes and cars. This may be particularly appealing to those who have young children and want to provide a sense of continuity. In addition, as is the case with the other bankruptcy chapters, filing stops creditor harassment and any pending foreclosure actions.
Whether it is Chapter 13 bankruptcy or another chapter is right for you, the first step is nonetheless the same, consulting with a bankruptcy lawyer.
Source: Fox Business, “Chapter 13 Bankruptcy: How it Works,” Susan Ladika, May 9, 2013
