Getting a fresh financial start may require you to consider filing bankruptcy. If you have significant debt that you cannot afford to pay, it may provide a way to get out from under collection agencies.
There are two main paths that individuals and couples may take when it comes to filing bankruptcy. Chapter 7 involves liquidating assets to pay some creditors. This may feel like a scary option, especially if you have a family and want to hold on to property and other assets. In that case, Chapter 13 may prove the better choice. Learn how Chapter 13 works and decide if this avenue helps you get the reboot you need.
Meeting the income threshold
Chapter 13 bankruptcy differs from Chapter 7 in that it does not require liquidating your assets. You may keep your home and vehicles under Chapter 13 even if you are behind in payments. Debts with collateral are the first paid by the court. However, to qualify for Chapter 13, you must meet income guidelines set out in the statute.
Calculating a repayment plan
The foundation of Chapter 13 is the repayment plan. The court-appointed trustee will want an accurate accounting of your debt. The trustee then uses your household income to determine how much of a payment you can afford. Once the trustee establishes the plan, you make monthly payments for the time specified.
Completing the plan
Chapter 13 takes between three and five years to complete. The court calculates the time based on the amount of your debt, and the payment plan hashed out with the trustee. Once you complete the terms of the repayment plan, the judge may discharge any remaining unsecured debt.
Bankruptcy may feel overwhelming, especially if the process is not clear. Once you understand how it works, you may find it helpful for relieving financial stress.