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What are the basics of chapter 13 bankruptcy?

On Behalf of | Jan 7, 2020 | Firm News

If you are like many Michigan residents who are struggling with overwhelming debt, it may be difficult to figure out how to pay off your creditors and recover your financial stability. Fortunately, there are several options you may pursue. If you have a source of consistent income, you may qualify for chapter 13 bankruptcy. Filing for chapter 13 may allow you to pay off your debt without losing your home or other major assets. 

You may find information about different chapters of the Bankruptcy Code on the website for the United States Courts. According to the Code, another name for chapter 13 bankruptcy is a “wage earner’s plan.” This type of bankruptcy differs from chapter 7, which usually requires liquidation of assets. If you have a regular source of income and meet the other requirements for chapter 13, you may be able to develop a feasible plan that allows you to pay off your debt without liquidating your financial assets. 

There are several potential benefits to filing for chapter 13 bankruptcy. One of the most important is that you may be able to avoid foreclosure and stay in your home. A repayment plan may give you the chance to become current on your mortgage payments again. This type of bankruptcy may also reduce penalties on anyone who is a co-signer of your consumer debts. 

In most cases, a chapter 13 repayment plan lasts for three years. Depending on your debt and income situation, a court may approve you for a five-year repayment plan. While you are within this time frame, you may get protection from creditors who would otherwise make collection efforts against you. 

This general overview of chapter 13 bankruptcy is intended to educate and should not be interpreted as legal advice.