Who can file for Chapter 13 bankruptcy?

Some debts can be good, while others can be bad. Generally, debts should be paid on time and local Nassau County, New York, residents know that failing to repay debts in a timely fashion can result in serious financial challenges, huge interest rates, creditor harassment and low credit scores.

When people talk about debts and ways to settle these debts such as bankruptcy, they often refer to liquidation – the selling of property and assets to pay off debts. For many debtors, liquidating assets is what they fear most. Debtors often think that they might lose their home and everything they own in order to settle their insurmountable financial issues. But everyone needs to understand that there are many different types of bankruptcies. One type is Chapter 13, which is also known as reorganization.

Under Chapter 13, debtors will undergo a repayment plan that can last from three to five years and not everyone can qualify for Chapter 13 bankruptcy protection. Those who have substantial or regular income can use Chapter 13 to settle their debts. Once the bankruptcy has ended, all remaining debts are discharged, allowing that person a fresh financial start.

Before filing for bankruptcy, debtors need to know that doing so can affect their credit score and it may take 10 years before the bankruptcy filing is removed from their credit report. On the brighter side, debtors who used bankruptcy to pay off their debts are likely to eventually be able to obtain a loan for buying a home once they become creditworthy again.

Any Nassau County, New York, residents interested in filing for Chapter 13 bankruptcy may wish to consult first with a bankruptcy attorney. By doing so, they will understand the pros and cons of bankruptcy and learn how to best use this legal process.

Source: BusinessDay, “How to know when to declare bankruptcy,” Feb. 10, 2014