No matter how much we try to manage our finances, sometimes things just go wrong. If you are drowning in debt, you may need to learn about Chapter 13 bankruptcy. Naturally, this is not something you do spontaneously, but rather something that you have to take into careful consideration. For instance, did you know that the full Chapter 13 bankruptcy proceedings take between three and five years to complete? That is quite a significant length of time and demonstrates that a bankruptcy is not just a quick way to get rid of your debts.
About Chapter 13 Bankruptcy
There are several different bankruptcy options, and Chapter 13 is no different in as such that it has pros and cons. You have to study these in order to determine whether or not the pros actually outweigh the cons. There are some significant benefits to Chapter 13, however, and this is why it is a popular option.
The big difference between Chapter 13 and Chapter 7 bankruptcy is that you do have to meet certain financial obligations under Chapter 13. These include child support payments and back taxes. If you file a Chapter 7, all your debts will be cleared. However, you will also lose all your assets. So, if you want to keep things like your home and your vehicle, it would be better to file for Chapter 13, have some of your debts cleared from your name, and follow a repayment plan for everything else.
While some people still chose Chapter 7, since it means all debts are gone, it is often better to opt for Chapter 13 even if you have back taxes to pay. This is because you can usually negotiate a deal so that you don't have to pay any penalties. Furthermore, the plans that are put in place mean that creditors and debt collectors can no longer chase you or your family members, phone you at work, or harass you at home. Plus, the courts will usually put measures in place to reduce the debt you owe and stop any interest charges from being made on them. Hence, you will actually pay back a whole lot less overall.
There is a big downside, however. Unless you have some sort of increase in your budget, you will spend three to five years on a very tight budget with no room for extras. This is an obligation under law and forms part of Chapter 13 bankruptcy. Hence, if you suddenly get any unexpected cash, it will likely be taken straight away and put towards your debt payments (this does mean that the time for your payment plan will also be reduced). What you will also find when you learn about Chapter 13 bankruptcy is that the court has to give you permission for any new liabilities that you want to take on. Plus, if you ever miss a payment, you are no longer protected under bankruptcy law. The reality is that only around a third of all Chapter 13 bankruptcies are a success, with the other two thirds evolve into Chapter 7.