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Chapter 13 bankruptcy can take 5 years

People often think of bankruptcy in Florida as a fairly quick process. While this can be true in some cases, most people think of it this way because they’re actually thinking only about Chapter 7 bankruptcy. If you’re going to use Chapter 13 instead, it can take a lot longer, as many take as long as five years.

There are some fundamental differences between the two types that cause this to happen. If you use Chapter 7, for instance, assets that you have will be liquidated and sold. Often, these are the assets that you bought with the line of credit, so they’re just being sold to get as much money back as possible. This money is then given to the lender, the lender forgives the rest of the debt, and you go your separate ways. This can take time, but may just take a couple of months.

Chapter 13 is not based around this same liquidation process, but around a repayment plan. The goal here is to pay off the lender over time. Assets won’t be liquidated. The repayment plan, though, can be spread out over five years, and you have to make these payments on time to complete the process.

Often, Chapter 13 is used for businesses where a monthly income exists, but it’s just not high enough to pay the money back as hoped when it was originally borrowed. Chapter 13 bankruptcy then spreads things out over a few years so that the business can keep running—and hopefully growing—rather than completely failing, as would happen if assets were liquidated.

Before starting the bankruptcy process, make sure you know exactly what to expect.

Source: Credit Cards, “Chapter 13 bankruptcy: How it works,” Susan Ladika, accessed Dec. 22, 2015

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