Are there advantages to filing for Chapter 13 bankruptcy?
The year 2020 was a difficult year for many in Southfield. Some people may have incurred significant medical debt that they cannot pay back, especially if they were furloughed without pay, let go when their workplace closed its doors, or even went back to work but at reduced hours and reduced pay. Sometimes the best way to handle financial difficulties is to file for bankruptcy. Some people will decide on Chapter 7 bankruptcy as it is concluded within a matter of months, leaving the debtor free to quickly move forward on fresh financial footing. However, it is also important to think about filing for the more lengthy Chapter 13 bankruptcy.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is also known as a wage earner’s plan. In a Chapter 13 bankruptcy, the debtor will develop a three- to five-year plan to repay some or all of their debts. The debtor will make regular payments to a bankruptcy trustee who will use these funds to pay back the debtor’s creditors. Once the payment plan is complete, the debtor will have many (but not necessarily all) of their remaining debts discharged.
What are the advantages of Chapter 13 versus Chapter 7 bankruptcy?
Chapter 13 bankruptcy has some advantages over Chapter 7 bankruptcy. First, in a Chapter 13 bankruptcy the debtors possessions will not be liquidated, meaning the debtor will be able to keep these possession. In addition, Chapter 13 bankruptcy allows a person to stop the foreclosure process for the length of the plan, giving a debtor time to catch up on their delinquent mortgage payments and possibly allowing them to keep their home. Chapter 13 bankruptcy also allows debtors to reschedule secured debts over the term if the Chapter 13 plan, which could lower payments on these debts.
Learn more about Chapter 13 bankruptcy
While Chapter 7 bankruptcy may be worthwhile for some, debtors should not dismiss Chapter 13 bankruptcy. For some, Chapter 13 bankruptcy may be the better option. This post is for educational purposes only and does not contain legal advice. Our firm’s webpage on Chapter 13 bankruptcy may be a useful resource for those who want to learn more about this topic.