Filing for bankruptcy is a serious financial step, but you may consider it if you’re struggling with debt. By filing for Chapter 13 bankruptcy, you will be able to restructure overwhelming debts by setting up a repayment plan.
Below are the kinds of debts you can include in your Chapter 13 bankruptcy repayment plan.
1. Priority debts
There are serious debts that can be categorized as priority debts. Therefore, when structuring your repayment plan, you must include and repay these debts. An example would be truant alimony, tax debts, child support and wages or salaries you owe to employees.
2. Secured debts
If you have debts that allow creditors to take your property when you default, then those are secured debts. Some of the common secured debts include mortgages and car loans. If you have such debts, you may address them in your repayment plan by retaining the property and paying the arrears and making regular monthly payments on the debt or returning the property to your lender
There are many benefits of filing for Chapter 13 bankruptcy if you’re having trouble paying a loan. For example, the principal balance and interest rate may be reduced if you have a car loan. This means you will have more time to repay the loan, and your monthly expenses will most likely reduce.
3. Unsecured debts
If you have any debts that don’t have collateral, these are considered unsecured debts. Examples of these debts may include utility and medical bills, credit card balances and personal loans. Sometimes, these debts may be reduced, and the remaining balances may be forgiven after you complete the repayment plan.
It’s crucial that you understand how debts are categorized under a Chapter 13 repayment plan. This will help you to understand your legal options and how to protect your assets.