What is Chapter 13 Bankruptcy?
You may be asking yourself “What is chapter 13 bankruptcy? What are my options with chapter 13 bankruptcy?” When considering bankruptcy as a solution for your debt problems there are several factors of which you should be aware before taking this important step. While some people do decide that bankruptcy is still in their best interest, taking the time to understand all of the facts up front can help you to make the most informed decision possible.
Since Chapter 7 bankruptcy is becoming more and more difficult to obtain these days due to changes in bankruptcy law, we’ll focus on Chapter 13 Bankruptcy, also commonly known as reorganization.
Chapter 13 Bankruptcy allows you to file a repayment plan in bankruptcy court for your debts. It is important to understand that your debts are generally not repaid all alike under this plan. For example, some debts must be repaid in full while other debts can be repaid as only a percentage of the original debt. Still yet, some debts no not have to be repaid at all. The plans usually last from three to five years.
After Filling Chapter 13 Bankruptcy
Now, the debts that cannot be discharged include those that are not listed in your bankruptcy papers, the majority of all student loans, child support and alimony, most tax debts, debts for personal injury or death that were caused while driving under the influence and fines and penalties that are imposed for breaking the law. The latter would include any traffic tickets and criminal restitution.
When filing this type of bankruptcy you should be aware that the court will generally place some restrictions on how you can spend your money. As unfair as this may seem, it is best to know up front that the court can and usually will set a specific amount of money that is to be garnished from your wages to cover the repayment of your debts. A trustee of the court will be assigned in order to make the payments to your creditors on your behalf.
The amount of time that the repayment plan will be in effect will vary, but it is usually not more than five years. If you are able to maintain the repayment plan all the way through to the end it is not uncommon to be able to once again obtain credit at the end of the repayment plan. Don’t forget; however, that even if you are able to obtain credit once again, the bankruptcy will still remain on your credit history for six years, even if you’ve paid everything off. Hopefully this has helped answers your questions about what is chapter 13 bankruptcy.