What is Chapter 13 Bankruptcy?

When you owe more debt to your creditors than you can currently handle and have decided to file for personal bankruptcy, Chapter thirteen bankruptcy can provide some very helpful solutions to help you get your finances back in order. Chapter 13 bankruptcy uses the bankruptcy court as a mediator between you and your creditors in order to re-organize your debts and create a way for you to repay either all your debt or a part of it. Total repayment is not always deemed necessary under chapter 13 cases- the court will consider the amounts and types of your owed debts to reach a decision on the repayment amount. Chapter 13 bamkruptcy also ends collection attempts made by your creditors and grants you protection from other measures such as repossession, utility shutoff, and wage garnishment.

When you file chapter 13 bankruptcy you are committing yourself to a future plan to meet the debts you owe, and this has some very powerful advantages. Chapter thirteen bankruptcy can allow you to keep your home by stopping foreclosure and making up missed mortgage payments. Back taxes can also be paid off through this type of bankrubtcy, which prevents your tax debt from accruing interest.

A chapter 13 bankruptcy case is a longer-term arrangement than other types of bankruptcy, because it establishes a prolonged plan that can allow you to manage repayments on what you owe. This means that when you file chapter 13 you are agreeing to a 3 to 5 year commitment to meeting your current debts. This period can be especially challenging for many because it means several years that will have to be spent living under a very strict budget and with exposure of your spending to the courts. The bankruptcy court will not permit you to spend money on anything it deems to be non-essential.

If you're considering filing personal bankruptcy, it's important to realize both the pros and cons of chapter 13. Chapter 13 is a strict repayment plan that will remain with you until it is finished according to the agreement that is reached between you and your creditors. Only about 35% of those who begin by filing chapter 13 bankruptcy eventually succeed in completing the repayment plan. The key to success when filing for Chapter 13 is to establish a very solid and detailed budget plan based on your current income and life expenses. If the budget you agree to in your case is not realistic, then you will have difficulty in meeting the demands of the repayment arrangement. But if you can develop a plan to remain organized and realistically live with a restricted budget while meeting a long-term objective for structured repayment, then Chapter 13 offers you excellent protection and advantages during the lifetime of your case.


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