Chapter 13 Bankruptcy
Chapter 13 Bankruptcy, also known as a wage earner's plan or debt consolidation bankruptcy, allows you to keep your home and car while paying off your debts over time from your own earned income. Usually, you can repay the debts at low to no interest and you can modify the length of many of your debts. In a chapter 13 you do not necessarily repay all of your bills. In fact, you may repay very little if any of your unsecured bills (credit card/medical/collection/etc). However, they would be eliminated or “discharged” at the end of your Bankruptcy plan.
The advantage of filing a Chapter 13 bankruptcy over Chapter 7 is that a homeowner in arrears on mortgage payments will be able to save his/her home from foreclosure. Many people file Chapter 13 bankruptcy to protect assets in which they have significant equity that otherwise may be lost in Chapter 7 liquidation bankruptcy, including their home and car. Chapter 13 provides a way for people to immediately prevent foreclosures and repossessions, while catching up on debts.
The payments you make in the Chapter 13 are structured so that you can meet all your living expenses first and then pay your creditors. A typical repayment plan lasts three to five years, during which you will make regular payments to a court-appointed trustee who then distributes your money to creditors according to the terms of your plan. Payments can be made through an automatic deduction from your paycheck or bank account. Once you have completed this repayment plan, most of your remaining debts are discharged.
If you are considering eliminating your debt through bankruptcy, the attorneys at Davison Legal Associates, P.C. can help guide you through the process from start to finish. Contact us today to schedule your consultation!