Chapter 13 is typically considered a debt restructuring plan. In the majority of cases, you will reorganize your finances and eventually repay at least some creditors on new terms. This indicates that you may be able to pay less than you owe, receive a reduced interest rate, and be released from your debts.
When compared to other forms of bankruptcy, chapter 13 is favored by creditors who will receive at least a portion of what is owed.
You will first discuss your finances with your attorney, determining how much money you will owe the creditors. He or she will create an exhaustive payment plan outlining all the rules you and your creditors must follow.
Typically, you must begin making payments thirty days after the case commences, and you have up to five years to settle your debts. During this period, the companies being repaid cannot attempt to collect additional funds from you, as you will typically pay only a portion of what you owe.
Some creditors will not consent to a payment plan because they want the total amount owed to them. However, if they do not consent to such a plan, it is possible that they will not recover any money, as you often have the option to file for a type of bankruptcy that does not involve paying anyone back.
Consequently, it is frequently in their best interest to embrace it. Typically, even if they disagree, the court will sanction the repayment plan so you can begin making payments. However, most courts permit your creditors to submit an objection.
Upon completion of your payment plan, you will typically be granted a complete discharge. It will take some time for this to stop affecting your credit score, but potential new creditors may notice that you filed for chapter 13, which indicates that you paid back a substantial portion of your debts despite financial hardship. Before you begin reorganizing your debts, you should consult with a counsel, as it is not suitable for everyone.
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