No one really wants to talk about bankruptcy. It’s a subject that can really drag you down without you even realizing what’s happening. The sad truth is that if you really want to make sure that everything is covered in life, you have to reach out for the best tool to get the job done.
In bankruptcy, we often talk about Chapter 7, the part of the bankruptcy laws that allows for a complete dissolution of debts that qualify for dismissal. It gives the person a fresh start, as long as they don’t have income that puts them over the limit.
If you do have income to repay, you’ll have to file Chapter 13 bankruptcy. Since it’s not covered often, you might wonder whether or not Chapter 13 can help you, or if it’s even still effective in today’s uncertain economy.
The good news is this — Chapter 13 bankruptcy is still effective. There’s a lot that you can actually do with this type of bankruptcy, to the point where it really deserves to get more press. You see, any bankruptcy is going to stop collection efforts on your account. That means that creditors won’t be able to call you at all hours of the day. You aren’t going to have to fight with collection agencies. They can’t mess with you anymore. It can also stop wage garnishment, and any asset freezing that is taking place. It just depends on the laws for your state as well. There are some debts that are going to not qualify to be included in bankruptcy, and those creditors will be able to still continue collection efforts.
What makes Chapter 13 powerful is that you will be able to keep certain assets that a Chapter 7 bankruptcy would force you to sell. When you’ve spent your whole life building up certain things, you don’t want to just see everything go down the drain. You can keep your house and car in either Chapter, but a 13 bankruptcy would allow you to keep antiques, collectibles, precious things that might have been in your family for a long time. If you had rental properties that were producing income, you could actually keep them and hope that the equity in the homes grow over time.
You must make sure that you have regular income, as well as less than 250,000$ in unsecured debt, and less than $750,000 in secured debt. Secured debts, if you’ll remember, are debts that are held on collateral. Failure to pay the debt means giving up the collateral that was used to acquire the property or money in the first place.
Since you’re going to be paying back a lot of your debt, you will also be able to repair your credit score. Chapter 7 people take a massive hit to their credit, and the time for that massive hit to subside is a lot greater than what Chapter 13 people go through.
However, that doesn’t mean that Chapter 13 bankruptcy is not without its own set of problems. For one, if you don’t make all of the payments that are due on your payment plan, the case is immediately thrown out. Another point is that the bankruptcy covers everything that is in default / behind before you filed. In other words, you can’t file bankruptcy and then refuse to pay your mortgage — you must keep making payments in order to keep the home.
To make this type of bankruptcy pay off, you must make sure that you can handle making extra monthly payments on top of your living expenses. This is where the steady income part comes in. Your plan payments generally last for 36 months, though it can go up to 60 months. That’s the limit. You make your payments to the trustee, who sends it to your creditors. At the end of your plan, you’re released from paying those debts anymore, even if there’s still money left over. So in a way, you’re still getting a fresh start because you could end up being forgiven up thousands of dollars of debt.
To file bankruptcy under this Chapter, you should still make sure that you get a good bankruptcy attorney on your side. There’s a lot that can go wrong with a bankruptcy of any type, so make sure that you get the information you need that matches your own unique situation, and since this is just general advice — be careful and good luck!