When debtors begins to consider bankruptcy, it usually doesn't take too long for them to discover that Chapter 13 offers many of the same protections and debt relief of other bankruptcies, without requiring those who owe to get rid of all their property. While Chapter 13 is not available to all debtors, those who qualify may find that it offers the flexibility they need to get their finances back on track without starting at ground zero, financially speaking.
If you are interested in filing for bankruptcy, be sure that you fully understand the intricacies of the Chapter that you choose. Failure to understand the issues at hand or properly navigate the process can create an even larger financial disaster than the circumstances that pushed you to bankruptcy in the first place, so this understanding is important to prioritize. An experienced bankruptcy attorney can help you assess your finances and create strategies to protect your rights and the property that you most value.
Debt reorganization versus debt liquidation
Chapter 13's primary distinction from Chapter 7, which is the most common form of bankruptcy, is that it does not necessarily require the debtor to give up his or her property to receive a discharge. Instead, a debtor creates a repayment plan using existing income, which must be high enough to allow for significant payments.
The process allows those who have significant income to pay off debts and retain their property, discharging unpaid debt at the end of the repayment period. If the debtor follows the steps laid out in the plan and makes payments on time, the court usually discharges most remaining debts at the end of the repayment period.
Through this process, a debtor repays most or all of his or her debt over time, with the protection of the court against frustrating and often unethical collections practices. As long as the debtor continues to abide by the guidelines of the process, debt collectors must completely halt all collections tactics.
Dealing with a trustee
Chapter 13 gives debtors with significant income a method of repaying and discharging debt without getting rid of physical property. However, this process can prove frustrating because it still requires the debtor to give up many freedoms.
Fortunately, those who use Chapter 13 often find that dealing with a trustee is much easier than the experience of those filing Chapter 7. Trustees in Chapter 13 reorganizations tend to give debtors more flexibility and usually want to work with the debtor to find repayment structures that fit well into the debtor's budget. While a debtor may not need to surrender assets to the trustee, he or she must still abide by the trustee's guidance.
Understand your own options
If you qualify for Chapter 13, it is worth considering, especially over property liquidation through Chapter 7. You may have opportunities to reset your financial life and retain the possessions you've already attained. With professional counsel, you can rest assured that you have the tools you need to address your financial concerns while keeping your rights and privilege protected.