No two individuals or households will have identical financial situations. Those who have fallen behind financially and who have debt that they cannot seem to pay down or manage will sometimes turn to bankruptcy as a way to re-establish financial control.
For those with significant property or stable income, a Chapter 13 filing could be the flexible solution they need to bounce back financially.
Chapter 13 bankruptcy offers significant versatility
If you are someone with a lot of property but only moderate income, Chapter 13 bankruptcy gives you a way to protect what you always own. If you have substantial income and a lot of debt, you can qualify for a Chapter 13 bankruptcy when you likely would not be able to file for Chapter 7 filing.
Exactly what happens in a Chapter 13 bankruptcy will depend on the amount of debt you have and the agreements that you reach with your creditors.
You can renegotiate some of your debts
One of the reasons that Chapter 13 bankruptcy is such a powerful tool is how it empowers someone to renegotiate the accounts that they have with creditors. Lenders who want you to reaffirm a debt and continue making payments may cooperate with you by helping you extend your repayment period, reduce your interest rate or reduce your monthly payments.
Your trustee arranges an appropriate repayment plan
Before the courts will discharge the balances on your unsecured debt, you will need to make regular payments on those accounts. A creditor meeting will help you, representatives from your creditors and the court-appointed trustee negotiate a plan that works for everyone.
You then make payments to the courts, rather than needing to juggle multiple payments to different creditors. Once you complete the repayment plan, which will usually last at least three years, you can then request the discharge of the remaining balances of your unsecured debts.
You get to set the priorities in a Chapter 13 filing
You understand what potential new loan terms might work for your household, and you know whether you are in a position to reaffirm a debt or need to release the collateral property for it because you won’t be able to bring the account into good standing.
Learning more about the process of Chapter 13 bankruptcy can help you make the most of a potential filing.