Know the key facts about Chapter 13 bankruptcy

On Behalf of | Jul 10, 2019 | personal bankruptcy |

There are many reasons Indiana residents find themselves in difficult financial straits. Whether it is medical expenses, losing a job, overextending on credit or other dramatic life changes, the stress from overwhelming debt and the endless phone calls from creditors can be frightening and worrisome. There are alternatives to eliminate debt and get on better financial footing, but it is wise to understand the details before taking the next step. For homeowners who want to retain their property and stop foreclosure, Chapter 13 bankruptcy might be useful. Knowing the basic details of Chapter 13 bankruptcy is crucial.

Unlike a Chapter 7 liquidation or a Chapter 11 business reorganization, Chapter 13 bankruptcy has certain tenets that allow a person to retain property and make monthly payments to a trustee. This will last for three or five years. The person must take part in credit counseling to learn better ways to handle money to avoid repeating the same mistakes that made the bankruptcy necessary. The individual’s disposable income will dictate how much will be paid per month and if he or she is eligible for Chapter 13. This can reduce how much is owed and, over the long term, save money.

In general, a person will be able to retain a home and other assets, like a car. If there are mortgage payments, they must be current. The following debts are assessed in a bankruptcy: priority, secured and unsecured. The priority debt must be paid back. It includes child support, student loans and taxes. Secured debts are for items like a home or car that can be repossessed to pay back creditors. Unsecured debt is a credit card bill or medical expenses, for example. With Chapter 13 bankruptcy, some unsecured payments must be made, but this can be written down significantly.

It is not unusual for debtors to think they have no way out of their financial morass. Some might believe that bankruptcy is a shirking of responsibility and is ineffective. However, it is a legal and beneficial way for people to clear many debts and restart their financial lives after getting debt relief.

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