With a variety of high level benefits, it’s easy to opt for Chapter 13 bankruptcy before ever learning more about the process as a whole.
Unlike Chapter 7, with Chapter 13 bankruptcy you’re required to use a repayment plan to pay back some of the money you owe creditors. It may not be the ideal situation, but if you don’t qualify for Chapter 7 it could be your only option.
How long does it last?
Generally speaking, your Chapter 13 bankruptcy repayment plan will last either three or five years.
If your average monthly income for the six months leading up to your filing was more than the median in your state, you’ll use a five-year plan.
Conversely, if your average income was less than the median, a three-year plan will work.
What if you fail to pay?
It’s easy to file for Chapter 13 bankruptcy with the idea that you’ll follow the rules of the repayment plan. However, as the months go by, you could find your financial situation changing.
If you’re unable to make payments for any reason, such as a job loss, you need to work with the trustee to modify your agreement.
With a Chapter 13 bankruptcy repayment plan, you’re using your disposal income to repay the debts you’ve collected . Once three or five years go by, your bankruptcy is in the past and you can move on with a clean slate.
Understanding how a Chapter 13 bankruptcy repayment plan works will go a long way in helping you make the right decisions for your current financial situation.