A chapter 13 bankruptcy allows individuals a payment plan in order to repay their debt. Under this chapter, a repayment plan is installed over the course of three to five years. Depending on the debtor’s monthly income will depend on how long the payment plan will be. If the debtor’s monthly income is greater than the state median, the plan can generally last five years. Five years is typically the maximum and payment plans cannot last for any longer. There are certain aspects to a chapter 13 bankruptcy that we will discuss in this blog.
For starters, chapter 13 bankruptcy offers a number of advantages over a chapter 7. Chapter 13 allows individuals to save their homes from foreclosure and it may cure delinquent mortgage payments over time. Individuals are allowed to reschedule secured debts and it can be extended over the life of the chapter 13 payment plan. Chapter 13 bankruptcy also protects third parties who are liable with the debtor on any consumer debts which can also protect co-signers. Another advantage includes chapter 13 acting as a consolidation loan under the payment plan to a trustee who then distributes the payments to the creditors. The debtor will have no direct contact with creditors while under chapter 13 bankruptcy protection.
Once the court confirms the plan, the debtor has to make sure the plan will succeed. Payment plans are often done through payroll deductions and it can increase the likelihood that payments will be made on time. It will also help the debtor complete the plan on time. Payments must be made regularly which will require the debtor to live on a fixed budget for a period of time. New debt cannot be incurred while payments are still being made because it may compromise the plan. If a payment is missed or the debtor fails to file their required tax filings during the case, the court may dismiss or convert the debtor’s case.
Chapter 13 can be complex, therefore consulting with a competent and experienced bankruptcy attorney can make the process smoother. If you are considering filing for chapter 13 bankruptcy, we at DAL Law Firm can help you. Give us a call or text today at 206-408-8158 to schedule a consultation if we may be of assistance. We look forward to helping you.