Chapter 13 Bankruptcy Explained

Chapter 13 Bankruptcy is a type of bankruptcy that gives the debtor the chance to work to pay down the debts without the threat of repossession or harassing creditors calling. The goal of filing Chapter 13 Bankruptcy is not to discharge debts, but to have the chance to pay the debts back with a better payment structure. In many ways, Chapter 13 Bankruptcy is more like a debt repayment plan than a way to get out of debt instantly.

Some individuals have to file Chapter 13 and do not have the option of filing Chapter 7. Under new federal laws, individuals who have a higher income than the average income of families of the same size in their state cannot file Chapter 7 Bankruptcy. Therefore, higher income individuals are forced to work to repay their debts. However, they can do so easier under Chapter 13 Bankruptcy than they could on their own.

If you file Chapter 13 Bankruptcy you will be able to keep your assets. The court will work with your creditors to develop an interest-free repayment plan. You and your creditors will be given a detailed written document outlining this repayment plan.

You will begin sending payments based on the plan within 30 to 45 days of filing bankruptcy. You usually do not have to use a trustee when filing Chapter 13 Bankruptcy. Your creditors will not be allowed to collect anything from you other than what is outlined in the plan. Also, they do not have to agree to the plan, because the courts control the repayment structure. This gives you the chance to have lower monthly payments as you work your way out of debt, while keeping your property in your own control. In most cases you are qualified to file Chapter 13 Bankruptcy if you have a steady, verifiable income to use to repay the money in the payment plan.