Chapter 13 is a different approach to bankruptcy, because those who file create a repayment plan based on their income. Rather than erasing their debt, they restructure it to fit their existing financial needs. There are many benefits to filing Chapter 13 because it allows those who choose this avenue to keep their property. It simply creates some breathing room so debts are easier to handle.
How will filing Chapter 13 bankruptcy affect a person’s credit score?
If a person declares bankruptcy, there will be a negative impact on their credit score, and the filing will stay on that person’s record for 10 years. However, creditors are likely to view a Chapter 13 filing more favorably than a Chapter 7, and will be more likely to lend to someone because they are in the process of paying back at least a portion of their debt.
How does Chapter 13 bankruptcy work?
In a Chapter 13 bankruptcy, a court will decide how much a person is reasonably able to pay back unsecured lenders based on income, and will then set up a repayment plan. The plan includes a time frame – usually three to five years – to pay back the debts. Funds for loans are given to a bankruptcy trustee to pay creditors, and co-signers are not on the hook for any of the funds owed.
What protection does Chapter 13 offer?
Once a court has approved an applicant’s filing, creditors are barred from attempting to collect any payments from the debtor if they are part of the bankruptcy proceeding. A Chapter 13 filing will also allow debtors to keep their property, in some cases paying back less than they owe.
Chapter 13 is a great option for someone attempting to save his or her home from foreclosure and will allow them to pay off delinquent mortgage payments over a scheduled period of time. Once Chapter 13 is filed, a foreclosure motion is frozen, which can give debtors a chance to catch up on their delinquent balances.
Who is eligible for Chapter 13?
In order to file for Chapter 13, you will have to prove to a court that you have the income available to pay back your creditors. That proof comes from the previous four years of both state and federal tax returns. Those who come to court without those documents will have their cases dismissed.
Are you considering Chapter 13?
Are you considering filing for Chapter 13 bankruptcy? If so, you may want to consider hiring an experienced bankruptcy attorney who can handle your case with discretion. The experienced team of attorneys at Hedtke Law Group understand the stress of filing for bankruptcy, and our experienced, professional team can provide the advice and assistance needed to make the process easier. Please call our team of attorneys today at 626.502.8405.