When you are in debt, it can be difficult to decide what to do next. Sometimes, you can work your way out of deb on your own but unfortunately, this is not the case for everyone. This is where Chapter 13 bankruptcy can help. It is specifically for those who need to recover financially while still having enough money to live on every month.
What Is Chapter 13 Bankruptcy?
Answering this question is difficult, as all bankruptcy options are complicated. There will be exceptions and caveats to any simple, straightforward answer. We can, however, provide a general overview of the process.
Essentially, Chapter 13 allows people to pay creditors based only on what they can afford after paying their monthly living expenses. So, if let’s say your monthly income was $4,000 and your monthly living expenses were $3500, that means you only have $500 left over. This is all you would be paying creditors every month.
When you file for Chapter 13, the court appoints a trustee to handle your case. The trustee pays your creditors directly until you are eventually cleared of your debt.
Here are some ways that Chapter 13 can help you.
Chapter 13 Can Lower Your Monthly Payments
One of the biggest problems with debt is managing your monthly expenses. Your debt may be so large, that you’re stuck in a cycle. To simply survive, you begin missing monthly payments or paying them late, accruing fees. At that point, the money you spend isn’t even helping reduce the debt. It’s just keeping you current with payments.
Using Chapter 13, you may be able to lower those monthly payment as explained above. Once the repayment terms are approved by the court, creditors have no choice but to accept what you can afford. Thus, you can start spending less money on your debt and redirect those funds into managing your daily life. Typically, this repayment plan takes about three to five years to complete.
Chapter 13 Can Reduce Your Debt
In Chapter 13 bankruptcy, certain debts such as taxes and secured debt need to be paid in full. A secured debt is where you borrowed from the lender using collateral such as a car.
Chapter 13 bankruptcy can, however, wipe away all your unsecured debt, or debt that has no physical collateral attached. This may include your credit card debt, utility bills, medical bills, and more. With this debt removed, you can focus on paying off your other loans and rebuilding your finances.
Chapter 13 Can Help You Keep Your Property
Depending on the nature of the debt and your needs, Chapter 13 can help you keep your property. Since you are pledging to pay off your debt over time, it may not be necessary to give up your collateral. This means you may be able to keep the house, car, and other essential assets. An experienced bankruptcy attorney will be able to analyze your case thoroughly to help you decide what is best for you.
If your finances are in trouble, contact us for a free consultation, and see if Chapter 13 is right for you. You can call us at (888) 256-8581 or reach out to us online.