Chapter 13 bankruptcy is known as the wage earner’s plan. This is because you can continue to work and bring in an income while you go through this kind of bankruptcy, and you’re supposed to make payments on your debt. Chapter 13 bankruptcy allows you to discharge some debts after making on-time payments for a specific period of time, usually between three and five years.
If your monthly income is less than your state’s median earnings, then your plan will be for three years. If you have an income higher than the median, you will need to pay for five years in most cases.
During the time when you’re in bankruptcy, creditors are not allowed to continue collection efforts. Anyone who calls you or sends you mail should be referred to your attorney or the court. If the agency continues to attempt to collect a debt, it can be accused of violating state and federal laws.
Chapter 13 bankruptcy’s main benefit is that it does not require the liquidation of your assets. You can save your home from foreclosure, simply because you make an agreement with the creditors to make payments on time for the next several years. You must make all mortgage payments due during your bankruptcy, even if it wipes out some of your past-due bills.
Chapter 13 bankruptcy is best described as a consolidation loan; with the right support in negotiating, it can be an affordable option for paying off your debt in a reasonable amount of time. This could be the right choice for you, or you may want to consider other legal options.
Source: United States Courts, “Chapter 13 – Bankruptcy Basics,” accessed Dec. 06, 2016