If you are one of the millions of people each year who are having difficulties keeping up with your monthly bills due to debt, a Chapter 13 bankruptcy may be the perfect option for you. This type of bankruptcy is available to most people, and will provide you with many benefits beyond simply getting you back on a sound financial footing. Read through this blog to learn more about what a Chapter 13 bankruptcy is, and if it is right for you.
How a Chapter 13 Bankruptcy Works
Chapter 13 bankruptcies aren’t set up to completely eliminate your debts, but instead to restructure them in a way that will better work for your financial situation. When going through the process, you will meet with the courts and creditors so that a solution to your financial troubles can be reached. The courts will then issue a ruling that lays out how things will work for you going forward. The courts have lots of options available for helping to eliminate financial problems, including the following:
- Eliminating Fines – The courts will often eliminate any fines from your account to help you get back on track. This can include both past fines on accounts as well as fines that would be incurred going forward.
- Reducing or Eliminating Interest Rates – Reducing or eliminating your interest rate can help minimize the total amount that you have to pay back so that your debts can be paid much more quickly.
- Extending the Length of Debt – By extending the length of time you have to repay certain debts, it can help reduce the amount each month that has to be paid.
- Reducing Principal – While Chapter 13 isn’t primarily focused on eliminating actual debts, they do have that option in certain cases.
- Bringing Accounts Current – When you emerge from bankruptcy, all of your accounts will be considered current.
- Much More – The courts really have a lot of leeway when it comes to helping people to emerge from bankruptcy in as strong of a financial position as possible.
Once the courts have decided how your finances will be organized, you will have to pay them the set amount each month (or they can simply garnish your wages). The money that is paid to the courts will then be split among your creditors to repay the debts according to the bankruptcy agreement.
Additional Benefits of Chapter 13 Bankruptcy
In addition to helping you get back on your financial feet, filing for bankruptcy has some other very important benefits to be aware of. First, as soon as your case is filed with the courts, all creditors are legally required to stop trying to collect the debt you owe. This means you won’t receive any more phone calls, letters, or other collection attempts. Additionally, any foreclosure processes must be halted while the bankruptcy is active. To learn more about the benefits of a Chapter 13 bankruptcy, or to schedule a consultation with an experienced bankruptcy attorney, please don’t hesitate to contact us today.