Financial stress is a heavy burden that many Long Island residents carry. When an individual holds significant debt and does not have the ability to pay off their obligations in full, they may turn to options like bankruptcy to help them move their life forward. Chapter 13 bankruptcy is a legal process that allows a debtor to use their existing income to pay down their financial obligations overtime.
On its surface, Chapter 13 bankruptcy may appear to be a no-lose solution to financial problems. However, it is important that individuals understand both the benefits and drawbacks of filing for Chapter 13 bankruptcy before they begin their proceedings. A bankruptcy attorney is an excellent source of information on these and other bankruptcy topics, and readers are reminded that this post does not provide any legal guidance.
How Chapter 13 can help
Chapter 13 bankruptcy helps debtors eliminate their debts. When the process is successfully followed and completed, it ends with a debtor being released from there covered debts. This release is called bankruptcy discharge and allows an individual to move forward and rebuild their financial standing.
Chapter 13 bankruptcy also allows debtors to keep much of their personal and real property. Unlike Chapter 7 bankruptcy which requires individuals to sell property in order to have money to repay their creditors, Chapter 13 bankruptcy relies on debtors’ incomes for the fulfillment of their repayment plans. Using their existing incomes, debtors may follow their court-approved repayment plans to satisfy their obligations to their creditors.
Potential pitfalls to Chapter 13 bankruptcy
Despite its advantages, there are drawbacks individuals should understand about filing for Chapter 13 bankruptcy. First, the process of reaching discharge can take years. It is not an immediate solution and debtors should be aware that their repayment plans may last for up to five years. Second, not all debts can be discharged in Chapter 13 bankruptcy. Student loans generally may not be included in repayment plans.
Chapter 13 bankruptcy requires individuals to meet many conditions in order to have their legal proceedings completed. The failure to meet specific bankruptcy steps may result in their bankruptcy filings being thrown out. Once a person finishes Chapter 13 bankruptcy and reaches discharge, they may find it difficult to obtain credit and reestablish their financial power for several years.
Debtors must decide for themselves if they want to take on the legal process filing for Chapter 13 bankruptcy. The answer may be different for different debtors, but those with financial stresses may turn to their trusted bankruptcy attorneys for add vice and recommendations on how best to deal with their debts.