Chapter 13 bankruptcy allows people who do not qualify for Chapter 7 bankruptcy (or who would prefer to repay their debts over time) to set up a three-to-five-year plan for the repayment of their debts. Chapter 13 bankruptcy has advantages that other forms of bankruptcy may not, such as making it easier to afford your monthly debt payments and helping you keep all of your assets.
Chapter 13 bankruptcy is known as a wage earner’s plan and is designed to help individuals pay back part or all of their debt over the course of three to five years. If the debtor earns a monthly income that is less than the current state median, the plan will be only for three years. If they earn more, then it will be for five in most cases.
What are the benefits of Chapter 13 vs. Chapter 7 bankruptcy?
Chapter 13 bankruptcy has several advantages to keep in mind. For example, it gives people the opportunity to prevent or stop foreclosure, so that they can keep their homes. With Chapter 13 bankruptcy, it’s possible to cure delinquencies over time, so that individuals may make up their missed payments.
Chapter 13 bankruptcy has the potential to prevent cosigner liability in some cases. Since it works like a consolidation loan, creditors and collections agents will not be in contact with you during a Chapter 13 bankruptcy case once it’s in process. Instead, they will contact a trustee who handles the payments as directed by the court.
Chapter 13 bankruptcy eligibility and discharge
Chapter 13 bankruptcy is available to individuals who have unsecured debts under $394,725 or secured debts under $1,184,200. If you can’t qualify for Chapter 7 bankruptcy due to your income, then you may want to consider a Chapter 13 bankruptcy instead. This will give you an option to qualify for bankruptcy protection despite earning a higher wage.
Once you complete the bankruptcy, all three or five years of payments, then any remaining qualifying debts may be discharged by the court. This may help you get the fresh start that you deserve in the shortest possible amount of time.