A Simple But Essential Guide to Chapter 13 Bankruptcy
Did you know that chapter 13 bankruptcy is a type of personal bankruptcy available in the U.S.? Though many people automatically associate personal bankruptcy with Chapter 7 bankruptcy, Chapter 13 is an alternative well worth considering. However, it is a bit different.
Here’s a quick look at what Chapter 13 bankruptcy entails:
- Many people do not file for bankruptcy under Chapter 13 because they don’t qualify. In order to qualify, you’ll need to prove that you’re able to pay off most of your debts, if not all of them.
- The court will help you create a repayment plan and you’ll have to show that you’re able to make these payments. You’ll be required to pay off your debts for a certain number of years, after which the remaining outstanding debts are discharged. You must agree, though, to pay off more than the minimum amount if possible, ideally meaning that you’ll end up paying off your debts completely.
- You’ll have to pay a fee when filing for Chapter 13 bankruptcy. Usually this is $310, which is a bit lower than the $335 you’d pay for a Chapter 7 filing.
- There are certain debts that cannot be discharged under personal bankruptcy, so if the majority of your debts fall under this category, you might find that Chapter 13 is a better choice than Chapter 7. Child support and student loans, for example, cannot be discharged when you file for bankruptcy. This can actually be a problem for many people, considering that around 15,000 bankruptcy cases per year are a result of student loan debts.
- One of the biggest benefits of Chapter 13 bankruptcy is that you’re able to keep your personal property. This is a major advantage if you have property, such as valuable personal items or even real estate properties, that might otherwise be taken by the court to pay off your debts.
- Although the repayment plan means that a Chapter 13 bankruptcy case lasts a lot longer than a Chapter 7 case, it’s often better in the long run. Making your payments on time allows you to build up your credit score a bit, and the overall effect that the bankruptcy filing has on your credit score isn’t as severe.
If you’re struggling to pay off your debts and you’re thinking about filing for bankruptcy, know that you’re not alone. An experienced bankruptcy lawyer will be able to guide you through the process, and there are around 1.5 million Americans in any given year who are going through the exact same thing as you are.