An individual coping with significant financial hardship has several options available to them. Bankruptcy is one of the fastest and most effective ways of addressing high levels of personal debt. A successful bankruptcy filing leads to a discharge of someone’s unsecured debts. It can also prevent creditor lawsuits and other aggressive collection efforts while the bankruptcy is underway.
Some people pursue a Chapter 7 bankruptcy because their income is at or below average. A Chapter 7 filer can go from deciding to pursue bankruptcy to receiving a discharge in a matter of months. It takes substantially longer to reach the discharge stage of a Chapter 13 bankruptcy than it does to finalize a Chapter 7 bankruptcy.
Chapter 13 bankruptcy takes years to complete
The mandatory repayment plan is one of the main factors that separates a Chapter 7 bankruptcy from a Chapter 13 bankruptcy. The filer meets with a trustee appointed by the courts and representatives from their creditors to negotiate a repayment plan.
They then make monthly payments directly to the courts. The trustee distributes the funds that they send in among their creditors according to the plan negotiated at the meeting. Depending on the extent of someone’s debt and certain other factors, the repayment plan typically lasts at least three years. The courts can potentially order someone to make payments for up to five years.
It is only after completing the repayment plan that the filer becomes eligible for the discharge of the remaining balance on their unsecured debts. Despite how long it may take to complete the Chapter 13 bankruptcy process, it is a reasonable solution for those in a variety of different personal scenarios. Chapter 13 bankruptcy proceedings can be beneficial for those with above-average income and also people with assets that they would otherwise need to liquidate in a Chapter 7 bankruptcy.
Learning more about Chapter 13 bankruptcy repayment plans can help people understand what to expect when they ask the courts for help with their personal debts. Those who complete a Chapter 13 bankruptcy can partially repay their creditors while working toward a discharge of the remaining balances that they owe.