Chapter 13 Bankruptcy

Chapter 13 bankruptcy is one type of bankruptcy.  There are various types of bankruptcy and understanding each type is important. 

Chapter 13 is available only in certain situations and only those who are best qualified for this type of bankruptcy should file under it.

Basic Outline of Chapter 13 Bankruptcy

Chapter 13 can be filed by individuals.  It can only be filed by an individual who has a steady and secure source of income. 

A Chapter 13 is a repayment plan.  Debts are not wiped clean.  Instead the individual agrees to a plan in court that established repayment of debts.  Creditors also must agree to the plan, which is based on the individual's income.

Steps in Filing Chapter 13 Bankruptcy

A Chapter 13 requires you to first abide by the new bankruptcy laws and seek credit counseling.  You will then file paperwork and the process will begin.

During a Chapter 13 your income and debts are looked at and a payment plan is devised based upon your income.  You and your creditors must agree to the legally binding repayment plan.

You will have to file a lot of paperwork and attend court hearings.  It is often smart to have a lawyer who can help you with negotiations with creditors.  The process can be frustrating, but you are under the watchful eye of the court and also protected by the curt, so you have nothing to worry about.  The court will help you to reach a repayment plan you can live with.

This can take some time to finalize but in the end you are protected and your creditors are getting paid.

Things to Know About Chapter 13 Bankruptcy

Many people wonder why to file a Chapter 13.  Since it is a repayment plan you are not getting debts wiped away so why not just do debt consolidation instead?  The easy answer to that is the court's involvement in the bankruptcy process.

You have more protection and more options.  The court makes sure you can afford the repayment.  It is an equal process where you are treated like a willing party instead of being badgered into a payment plan you can not afford.

Additionally, once you file for bankruptcy you are protected.  Creditors can no longer pursue collections.  That means you may be able to protect your assets and prevent court cases.

Of course, as with bankruptcy in general, it is always best to avoid it if possible.  You can start with trying to get creditors to work with you and then only move to bankruptcy if you are feeling threatened with losing assets and court proceedings.