The truth behind Chapter 13 bankruptcy

Many Nassau County, New York, residents are dealing with debt. Small ones are easy enough to settle, but insurmountable debt can be subject to creditor harassment. Whatever the reason, debtors need to understand that there are ways that can lead to a fresh financial start. One of the most viable options is filing for bankruptcy.

When people talk about bankruptcy, they often think that it’s shameful that someone has failed to manage his or her finances. But people need to understand that a person does not only accumulate debts from overspending. Unexpected event like serious illness, unemployment and divorce can force someone to use credit cards to make ends meet. Honest debtors who want a fresh start may choose to file for bankruptcy and a federal court will determine which type of bankruptcy best suits their needs.

One of the reasons why people are afraid to file for bankruptcy is the thought of liquidating their assets. Although this can happen in bankruptcy, there is one type of bankruptcy protection that allows debtors to retain their assets and pay off some of the debts – Chapter 13 bankruptcy.

Chapter 13 bankruptcy allows a debtor to pay off their debts through a repayment plan, which can last from three to five years. Debtors must have a stable source of income in order for them to qualify for Chapter 13. Once the bankruptcy protection has ended, the remaining debts will be discharged.

Before filing for bankruptcy, debtors must first research the pros and cons of this legal process. Consulting a legal professional also may help debtors in case they have questions regarding bankruptcy.

Source: Wall Street Sector Selector, “What is bankruptcy: five things you might not know,” Jan. 22, 2014