If you are dealing with a lot of debt, bankruptcy is a valid option. It is considered the solution for those that have been unable to successfully get themselves out of debt despite their best effort. Although bankruptcy leaves a mark on your credit report for several years, it is still the right option for many people when they are drowning in debt. When filing for bankruptcy, different chapter options are available to you. One of the most common forms of bankruptcy to file is Chapter 13. It involves coming up with a repayment plan to pay back much less than you originally owed to your creditors. If this sounds like something you may be interested in, Bouloukos Oglesby & Mitchell answers some of the most frequently asked questions on the topic of Chapter 13 bankruptcy below.
Is the Debt Erased?
One question most people will ask before filing in this manner is, “Will the debt be erased?” When you file in this way, your debt is not erased, and you will still need to pay it off. However, your attorney can negotiate lower payments and have creditors reduce the total amount of money owed to them. As a result, you would end up paying back much less than what you owed and on terms that are better for you. At the moment, you may be paying hundreds of dollars each month just trying to catch up, while your creditors continue to charge you late fees and interest. However, this would come to a stop when you file Chapter 13.
What is the Repayment Plan?
The repayment plan is something you would need to agree to when filing Chapter 13 bankruptcy. You are essentially agreeing to pay off your debt. While you may think this not a great thing because you are already struggling to pay off what you owe, the repayment plan is ideal for many reasons. Before the plan is devised, your attorney will negotiate with the creditors and will likely have them drastically reduce the amount owed. You may then have the amounts consolidated into one instead of worrying about making all kinds of payments to different creditors each month. You would agree to pay a set amount each month that would get disbursed to your creditors. The amount would be something that you can afford to pay without struggling.
Who is Eligible to File Chapter 13?
You are eligible to file for Chapter 13 bankruptcy if you have thousands of dollars worth of debt and a steady source of income. You need to be able to prove that you can afford to pay off your debt with the repayment plan. The best way to prove this is to provide tax documents that show how much you are currently earning from your workplace. It would also let the creditors know how long you have worked there. Proof of steady income is a requirement. Without a steady source of income, you would not have the opportunity to file for bankruptcy in this way. You would need to speak to your attorney about other options.
How Long is the Repayment Plan?
The length of the repayment plan varies from one person to the next. The reason it varies is that there are a lot of different factors to consider. Some of the factors include:
- Amount of debt owed. Someone who owes a lot more than another person may have a longer repayment plan because it will often take a bit longer for them to pay their debt off.
- Amount of money paid each month. Some individuals agree to pay more than others each month to get rid of their debt. Your monthly payment will depend on the amount of debt owed and what you can afford to pay. If you are paying less each month, it may take you a bit longer to get things paid off, but that is fine.
- Length of time it will take to get the debt paid off. Your repayment plan will continue until you have paid your debt off.
Before you agree to a repayment plan and sign any paperwork, carefully review the terms of the agreement. Make sure that your attorney is looking over the agreement and answering any of the questions that you might have pertaining to it. You should have a good understanding of the agreement before you sign anything and get put on a repayment plan to get rid of your debt for good.
Will Filing Put a Stop to Harassment From Creditors?
Receiving harassment from creditors is frustrating. Although they are not supposed to harass consumers, they will often do things that can easily cause stress and frustration. You have likely received a lot of calls from creditors asking you about your debt and attempting to get you to pay everything off in full. Not only do creditors call home phones and cell phones, but some will even take things a bit further and begin calling consumers at their jobs. No one wants to experience that level of harassment and embarrassment, but it happens. One thing you should know is that filing for bankruptcy does put a stop to the harassment that you have been receiving.
Once the process begins, no creditors should be attempting to contact you directly. Instead, your attorney will speak to your creditors on your behalf and work on the negotiation process. Your attorney’s goal is to have the creditors lower the amount of debt owed by a significant amount because that will make it a bit easier for you to get things paid off. While you may still owe the full amount of any secured debts, it is often possible to have your credit card debt lowered.
Is Bankruptcy a Good Decision?
Consumers often want to know if filing Chapter 13 is the right decision to make. While every person’s situation is different, Chapter 13 is often the right decision for those with a lot of debt who are willing to get on a repayment plan because they have a steady source of income. Before you choose this approach, your attorney will review your financial situation and provide guidance. The attorney will let you know if this is your best option for getting out of debt, improving your credit score, and ultimately improving your financial situation over time.
Considering Filing Chapter 13 Bankruptcy? Make Sure You Have a Bankruptcy Attorney to Assist You
Are you considering filing Chapter 13 bankruptcy? You may believe it is the best way for you to get out of your current financial situation, especially when that situation is dire due to the amount of debt that you have. Choosing this route is often ideal for those looking to get a fresh start without continuing to drown in debt for the next several years. Now that you have the answers to some of the most commonly asked questions on the topic of Chapter 13 bankruptcy, you may feel more confident that this is the right thing for you to do. If so, you need to meet with a skilled bankruptcy attorney who can review your situation and make sure that this is the best move for you to make. At Bouloukos Oglesby & Mitchell, we can provide you with the information you need and help you get the bankruptcy process started. We want to make the process as stress-free as possible for you. Reach out to us today at 205-351-0800 to book a consultation at your earliest convenience.