For some debtors in New Hampshire who are considering bankruptcy as a possible solution to overcoming unmanageable debt, Chapter 13 debt reorganization may be a viable option. In Chapter 13 bankruptcy, the debtor enters a repayment plan lasting between three and five years, during which time he or she will be required to make all scheduled payments to the estate. At the estate’s close, the remaining unsecured debts will then be discharged.

Chapter 13 allows debtors to do things like have a longer repayment period in order to catch up with things such as delinquent mortgage payments in order to avoid foreclosure. Under the chapter, debtors are able to potentially save property they might otherwise lose in a total liquidation under Chapter 7. In order to be eligible, the debtor must have filed all tax returns for the four years preceding the bankruptcy petition. This voluntary reorganization of debts is available to individuals and sole proprietors who have a regular source of income.

If the plan is successfully completed, the debtor will receive a discharge. Conversely, if a debtor fails to keep to his or her repayment plan, his or her bankruptcy case may be dismissed or converted into a Chapter 7 liquidation.

Voluntary reorganization of debt can be a good choice for some people who need relief from their debt. People who are considering bankruptcy may wish to consult with a bankruptcy attorney about the type of bankruptcy that will best work for their particular situation. Even if a person files a Chapter 7 petition, a lot of property may be exempt from liquidation. An attorney may be able to review their client’s background in order to develop a proposal.

Source: IRS, “Chapter 13 Bankruptcy – Voluntary Reorganization of Debt for Individuals“, December 22, 2014