What is Chapter 13 Bankruptcy and How do I Know it is Right for Me?

photo of hammer smashing dollar sign this article is about chapter 13 bankruptcy and how it works

Have you fallen behind on payments to your creditors over the past several months? Once you miss a month’s payment and are then charged late fees for not making those payments on time, it is hard to get back on track. If you have not been able to get your finances in order and are now struggling with a massive amount of debt, you are probably thinking about filing for bankruptcy. While there are different ways to file, Chapter 13 is one of the most common methods of filing for bankruptcy. It involves the process of reorganizing the debt you owe to different creditors and getting on a payment plan you can afford.

How Does Chapter 13 Bankruptcy Work?

If you want to file for Chapter 13, you will need to meet certain requirements. You should begin this process by hiring an experienced bankruptcy lawyer to walk you through everything you are going to need to know and do. It is important for you to understand what is going to happen when you submit your bankruptcy paperwork. Before you even file Chapter 13, your attorney can help you review your finances to determine if you are eligible to file this way.

You will need to have proof of a steady income, whether you are self-employed, receiving disability benefits, or working a part-time/full-time position. If you do not have a source of income, you cannot file this way. You can bring copies of bank statements and tax forms to provide proof of your income. There are also limits to the amount of debt you can have when filing for Chapter 13 bankruptcy. The attorney can talk to you about those debt limits to make sure that your debt has not surpassed those set limits.

Upon determining your eligibility, you can start the process of completing the bankruptcy forms with help from your attorney. There are questions on these forms that you are going to need to answer honestly but having a legal professional there to review the paperwork and explain it to you in detail is always beneficial. There is a pre-filing course that you are going to need to take. The course is often referred to as a credit counseling course and is something that you are typically required to do before you even begin the full bankruptcy process. The purpose of the credit counseling course is to help you better understand the steps you can take to avoid having to file for bankruptcy again in the future. After all, you want to improve your finances and stay out of debt when this is all over.

Do I Have to Sell Valuable Belongings?

If you were filing for Chapter 7 bankruptcy, you would likely need to sell off some of your valuable belongings to pay off the debt you owe to all the different creditors. Unfortunately, this can cause a lot of stress in your life because you might not want to part with some of those belongings. The great thing about filing Chapter 13 is that you are not going to need to sell off any of your belongings to pay your debt. Rather than selling off what you have to pay from what you owe, you can get into an affordable repayment plan that works best for you and helps you save money.

You do need to agree to a repayment plan with your creditors, but you can often end up paying much less than you initially owed to them. It all starts with the negotiations. By providing details of your income and the regular expenses that you have, your attorney can work on negotiating with your creditors to get them to lower the amount that you currently owe to them. It is possible to have the debt reduced by up to 50, which means you would only need to pay half of what your creditors were initially expecting to receive from you. Once you do settle on a specific amount with the creditors, you can make a convenient arrangement to pay off that amount little by little on a monthly basis.

In the past, you may have felt overwhelmed and stressed over your finances because you were spending thousands of dollars each month on debt repayments alone. After the negotiations take place and the debt is drastically reduced, monthly payments are much lower and far more affordable. Your bankruptcy attorney will work on making sure the amount you are expected to pay each month is an amount you can truly afford to pay without feeling stressed over your finances. After you have agreed to pay that set amount each month, you are locked into the repayment plan. The repayment plan will continue until you have paid off your debt and it will usually take anywhere between three and five years to complete.

How do I Know if Bankruptcy is the Right Decision?

Making the decision to file for bankruptcy is a big deal. It is something that will show up on your credit report for at least seven years, which is what you need to take into consideration before you officially decide to file. Although it does appear on your credit report and can leave its mark for quite some time, it is often the best solution for those with regular income who have simply fallen behind on their monthly payments and need a bit of help when trying to get back on track. If there is no other way to pay off your debt, this option can save you money in the long run.

If you have valuable items that you do not want to sell off to pay some of the debt you owe, Chapter 7 is simply out of the question. If you know that you have the funds to pay off some debt because you have a regular income, but you are simply falling behind each month because you are trying to catch up, Chapter 13 is a great solution. Your attorney will work hard to negotiate with your creditors to get your debt lowered and will then work on setting up an acceptable repayment plan.

When you are tired of receiving constant calls from creditors who are requesting their funds from you and making you feel both anxious and frustrated, filing for bankruptcy would put a stop to that. Once you start the process, the creditors will no longer contact you and your attorney will work on dealing with them to keep you from having to do so. It always helps to go to a free consultation with an attorney to discuss your debt and current financial situation.

Get Out of Debt Without the Frustration

If you have found yourself dealing with way more debt than you can handle and you have fallen behind on your payments to creditors over the past few months, you might feel like there is no way for you to get out of the frustrating financial situation you are in, but that is not true. Bankruptcy is an option for you to consider. Chapter 13 bankruptcy is an option that makes it possible for you to lower your debt while agreeing to a payment plan you can afford without going broke. If you would like to begin the bankruptcy process, you should get in touch with an experienced bankruptcy lawyer. When you want to receive the proper guidance and support during this tough time, contact Bouloukos Oglesby & Mitchell at 205-351-0800 for a free consultation.