If you are having issues paying off your debts, you might want to consider bankruptcy. There are 2 types of bankruptcy available and they are chapter 7 and chapter 13. It is important that you know what each type of bankruptcy has to offer and why you should consider chapter 13.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a financial reorganization plan which will help protect you from collection action by your creditors. This protection will be offered during the case and at the end, almost all of the remaining balances will be discharged. The discharge that is covered by chapter 13 bankruptcy will include debts that are not covered by chapter 7 bankruptcy.
Why You Should Choose Chapter 13
Choosing the type of bankruptcy that you file for can be a daunting task. This is why you need to know why you should be looking at chapter 13 bankruptcy. To determine if this is the best option for you, you should consider a few points.
The first is whether you have debts which will not be discharged under chapter 7 bankruptcy such as taxes and child support. You should also consider this option if you have liens which are greater than the value of the asset they are attached to. Another point to consider is if you are behind on mortgage or car repayments or if you are repaying a retirement fund loan.
Once you have considered these points, you should also note that chapter 13 bankruptcy does not mean that you have to pay the debts back in full. This type of bankruptcy will provide only a fractional payment which can be helpful to you. The plan determines how to pay creditors on a confirmation test basis. The Bankruptcy Code which covers this also states that priority claims will need to be paid in full such as family support and recent taxes.
Which Debts Will Be Discharged?
When it comes to choosing bankruptcy, you need to know what debts are going to be discharged. Chapter 13 is able to discharge a number of debts that chapter 7 bankruptcy cannot. This will include non-support debts which have come from a divorce process and recent tax penalties.
Of course, it is important to note that there are some debts that cannot be discharged with this type of bankruptcy. These debts will include recent taxes and child support. With these debts, chapter 13 bankruptcy will provide you with more time to pay them off.
Who Can File For Chapter 13 Bankruptcy?
It is important to note that not everyone is eligible for chapter 13 bankruptcy. In order to file for this, you will need to be an individual and not a business or partnership. You will also need to have a regular income which exceeds your reasonable living expenses. There is also a limit on the amount of secured and unsecured debts that you are able to have.
Chapter 13 bankruptcy is a financial plan that can help a lot of people who find themselves in financial trouble. It is important that you know what this type of bankruptcy is and if you are eligible for this.