3 Things To Know Before Using Chapter 13 Bankruptcy
Chapter 13 bankruptcy is the branch that people use to restructure or reorganize their debts. This branch does not offer an instant discharge of debts. Instead, it provides a plan for you to repay them. If you are interested in using this branch of law, you might want to learn several vital facts about Chapter 13 before hiring a lawyer to help you file. Here are several essential things you should know.
How It Restructures Debts
First, you should learn how Chapter 13 works, and the main thing to know is how it restructures your debts. Through Chapter 13, your attorney works on a repayment plan for your debts. They base the plan on several things.
First, they base it on your income. You must have enough income every month to pay for your debts. Secondly, they base it on your debts. Your lawyer will separate your debts into categories. One category is for priority debts, which are the debts you must repay through your case. The other category is non-priority debts, which are debts you might not have to repay in full through Chapter 13. The plan provides you with a monthly payment amount that you must pay to the trustee. This payment covers all your debts.
How the Plan Affects Your Life
Chapter 13 has some effects that you should understand before using it. The first effect is the payment amount. The payment amount will use up a large amount of your income. You will have some money left to use for other expenses, but you will not have a lot of money.
The plan will last for three or five years, depending on your income and debt load. You cannot skip a payment without experiencing repercussions. You must also stay in contact with the trustee handling your case, as you are required to report changes in your income or debts to the trustee.
The Benefits of Using Chapter 13
Using Chapter 13 can help tremendously in many ways. Chapter 13 lets you keep your home, car, and other assets because you repay your debts instead of receiving debt forgiveness. Chapter 13 can even help you stop a foreclosure. When you complete the plan, the court might forgive any remaining debts you have, which also helps you gain a better financial position.
Talking to a bankruptcy attorney about your situation is the best way to determine if you should consider Chapter 13 bankruptcy. If you are interested in this, contact a chapter 13 bankruptcy lawyer in your area.