What Is A Chapter 13 Bankruptcy?

Many people today have more debt than they can pay on a regular basis. Being in this situation is stressful to your family and can cause anxiety that leads to more serious health and emotional issues. But there are options out there, and understanding how those options work can relieve some of the pressure you are under when faced with overwhelming debt. Every day thousands of people across the country file for bankruptcy in order to get out from under heavy financial burdens and you can too. When you file bankruptcy you have a choice about what type of case to file. Consumer cases are either Chapter 7 matters or are filed under Chapter 13.

A Chapter 13 bankruptcy is a type of case that allows you to reorganize your debt in a similar way to doing a debt consolidation. With a Chapter 13 case, you take the following steps:

•        Prepare a proposed plan of how you are going to repay your debt. The plan sets forth your proposed repayment amounts on secured debts like your house and car by outlining the amount you are willing to pay for the item. With your house you will likely have to repay what is owed on the note, but with a car you can pay the value rather than the full amount due. By reducing the amount you owe on a car loan to only paying what the car is worth, you save a lot of money. You can also propose a lower interest rate on autos and this will save money as well.

•        The plan is filed and all of your creditors are given notice and an opportunity to accept the terms you propose, or object to the plan and seek a different repayment scheme.

•        The Court will listen to what you have to say about how you intend to repay your debt, and what the creditor thinks they are entitled to receive. Once the Court hears both sides a final decision will be made and an order confirming a repayment plan will be entered.

•        Once the order confirming plan is entered you will make one monthly payment, covering all of the debts in your plan, to the Chapter 13 Trustee. The Trustee will then disburse the funds to your lenders so you don’t have to pay them directly. However if you make the decision to pay some lenders directly and then pay the rest of your total monthly debt payment as set forth in the Chapter 13 Plan to the Trustee, you may do so.

If this all sounds complicated just remember that a Chapter 13 is like consolidating your debt into one lump sum payment per month. Even a portion of your unsecured credit card debt is covered under a Chapter 13. We can help you gain a better understanding of how this works by looking at your debt and income and then developing a repayment plan that works for you.

For more information about Chapter 13 bankruptcy, contact us at www.law-ri.com. We will help by coming up with solutions that work for you and have multiple locations to meet your needs for office visits.