The goal with Chapter 7 bankruptcy is to eliminate your debt entirely. You do have to liquidate some of your non-exempt assets, although there are exemptions for many things, such as your home or the tools of the trade. After the bankruptcy filing, creditors are paid, and the remaining debt is forgiven.
But Chapter 13 bankruptcy has a bit of a different goal. Instead of eliminating debt, it strives to make it affordable. This is done by consolidating that debt into a monthly repayment plan.
Managing your debt
Often, the problem that people find themselves facing is not just that they have outstanding debt, but that they owe multiple parties at the same time. It may not be possible for you to pay outstanding medical bills, credit card bills, car loans, home loans and much more. Since everything is due at the same time, your debt feels insurmountable, and it can cause you significant stress.
The nice thing about Chapter 13 bankruptcy is that it takes all of that debt, puts it into a single fund, and gives you a monthly payment that you have to pay based on your income. You generally have to make these payments for three to five years. But by spreading your debt out and turning it into just a single payment, it suddenly becomes affordable again, and you can fit it within your budget.
Exploring your financial options
If you have been feeling overwhelmed by debt, you can see how important it is to understand what legal options you have. It may be possible to find solutions that help you create the positive future you are looking for. Just be sure you know what steps to take and what options you have.
