Realizing that bankruptcy is the only way to get out of crushing debt can be disheartening. However, it’s essential to know that taking control of the problem will be critical, and deciding to file for bankruptcy is often met with a sense of relief for debtors. When making such a significant decision, it’s only natural that a debtor may have various questions. Chapter 13 bankruptcy should not be taken lightly. Consulting with a lawyer about your options will be critical to ensuring that you have made a well-informed decision when moving forward.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is also called the “wage earner’s plan.” This is the process of restructuring debts and repaying them over 3-5 years and is the right step for those who do not qualify for Chapter 7 bankruptcy. During this process, debtors will take the time to develop a repayment plan that allows them to settle a portion of their debts.
What is needed to qualify for Chapter 13 bankruptcy?
To qualify for Chapter 13, certain requirements must be met. A debtor must have unsecured debts that are less than $394,725 and secured debts that are under $1.1 million. Additionally, debtors should know that if they had a previous bankruptcy dismissed 180 days prior, they are not able to file for bankruptcy.
How is a repayment plan developed?
The repayment plan is a critical component to a Chapter 13 bankruptcy, meaning that a bankruptcy lawyer’s assistance will be critical. Your lawyer will work closely with you to develop a repayment plan that considers your income, expenses, healthcare needs, etc. Through this process, debtors can restructure their debts into a consolidated monthly payment. Once the plan has been completed, it is then submitted to the court for approval.
What happens if my finances change over the course of my repayment plan?
It should come as no surprise that finances can change over time. Should any changes occur while making repayments, debtors are responsible for reporting those changes to their bankruptcy trustee. Depending upon the situation, if a debtor receives an increase in their salary, they may be expected to make higher payments.
How long does it take to rebuild my credit after filing for Chapter 13 bankruptcy?
One of the biggest concerns debtors have is the impact filing for Chapter 13 could have on their credit and the length of time it will take to rebuild your credit. Typically, Chapter 13 bankruptcies stay on a person’s credit report for seven years. However, be aware that over time, your credit score will begin to improve. In some cases, you may even see your credit score rebound quicker than you thought.
Filing for Chapter 13 bankruptcy comes with both advantages and disadvantages, and deciding to file shouldn’t be taken lightly. In many cases, it can give debtors peace of mind in knowing that they have a plan for moving forward to take control of their debts. If you are managing significant debt, it’s crucial to take action and have a clear understanding of your options by contacting a lawyer, like a Chapter 13 bankruptcy lawyer today.