How to benefit from a Chapter 13 bankruptcy

Florida residents who are facing financial difficulties might be interested in learning about how they can benefit from filing for bankruptcy under Chapter 13. This chapter helps filers who have a consistent income to reorganize their debt into an affordable payment plan.

While most of a person’s non-exampt assets are liquidated in a Chapter 7 bankruptcy, Chapter 13 allows filers three to five years to pay back most of their debts, depending on the person’s income. It also forbids the debtor’s creditors from contacting the debtor during that period and puts a hold on foreclosure proceedings. Chapter 13 filers are also able to pay for any car loan and mortgage payments they missed in the past.

A Chapter 13 bankruptcy helps people to pay off their debts by arranging a monthly payment schedule based on their income. Three factors help create the filer’s monthly budget: the individual’s monthly expenses, Internal Revenue Service standards and rules laid out by the particular Chapter 13 bankruptcy trustee appointed to the task. This is similar to a consolidation loan in which the entire person’s debts are combined into one.

A further benefit of Chapter 13 is in regards to the debtor’s credit report. While a Chapter 13 bankruptcy will show up on the filer’s credit report, it will remain for 7 years instead of 10 years for Chapter 7 bankruptcy filers. Those three years could make a difference for people who need to finance a vehicle, rent a home or apply for a credit card.

Individuals who want to get a better grasp on their debts might want to file for bankruptcy. While Chapter 13 carries many benefits, Chapter 7 may be suitable for others, and a bankruptcy lawyer could explain the differences and requirements.

Source: FindLaw, “Benefits of Chapter 13”, Nov. 17, 2016