Most people who decide to file for bankruptcy will have to choose between Chapter 7 and Chapter 13 proceedings. Chapter 7 is a faster process, but it may require that someone sell certain possessions or empty their bank account to repay creditors before discharge. Chapter 13 bankruptcy may take longer, but it allows people to protect their personal property.
People choose Chapter 13 bankruptcy because they earn a decent income or they have property they want to protect from liquidation efforts. One of the key differences between a Chapter 7 bankruptcy a Chapter 13 bankruptcy is how Chapter 13 requires a repayment plan.
You, representatives from your creditors and the court-appointed trustee have a meeting where you establish a repayment plan. What will that plan require from you?
You make monthly payments to the courts
The repayment plan in a Chapter 13 bankruptcy will mean making three or more years of payments to the creditors whose debts you hope to discharge. After you establish how much you will pay each month and how much each creditor will receive from that amount, you don’t have to worry about sending the payments out individually.
Instead, you make one payment directly to the courts, and the trustee will handle distributing those funds among creditors. Although negotiating the plan can be a bit stressful, making the structured payments required will eventually result in your eligibility for the discharge of the remaining balances on those accounts.
Learning more about the rules of Chapter 13 bankruptcy can help you make decisions about your financial future.