Chapter 13 Bankruptcy Basics
As an experienced bankruptcy lawyer – including those who practice at The Law Offices of Ronald I. Chorches – can confirm, not every kind of bankruptcy is made available to everyone who may be interested in filing for bankruptcy relief. For example, not everybody is eligible to file for the two different kinds of personal bankruptcy that are generally made available to the American public. Chapter 7 bankruptcy is only offered to individuals and married couples filing jointly who meet certain income thresholds. As a result, if you make a relatively decent and steady living, you are likely ineligible to file for Chapter 7 bankruptcy relief.
Instead, you can potentially file for Chapter 13 bankruptcy relief. Chapter 13 bankruptcy relief is often referred to as “wage earners bankruptcy” or as “reorganization bankruptcy.” This opportunity will allow you to repay your debts in manageable installments over a three-to-five-year period. Filing for Chapter 13 bankruptcy isn’t the right opportunity for everybody who is seeking debt relief. However, depending upon your unique circumstances, this opportunity could potentially allow you to benefit from a fresh financial start.
Benefitting From the Automatic Stay
Immediately upon filing for Chapter 13 bankruptcy, you will benefit from legal protection known as the automatic stay. The automatic stay will prevent creditors from engaging in almost all kinds of collection actions against you while your bankruptcy case remains active. Many homeowners who are seeking to avoid foreclosure while they catch up on their outstanding payments benefit from the automatic stay to a particularly significant degree. Note that you must remain current on your bankruptcy repayment plan in order to continue benefiting from the automatic stay over time.
Constructing Your Bankruptcy Plan
When filing for Chapter 13 bankruptcy, you and your attorney will work together to construct a repayment plan that is manageable for you and reorganizes your debt appropriately. Then, once your repayment plan is accepted by your creditors and by the court, you will make monthly installment payments per the terms of your agreement and in accordance with your income as it may evolve over this period.
While it is true that filing for bankruptcy will cause your credit score to dip temporarily, it is important to understand that by paying your debt down in a reliable way over the next three to five years, your credit score should rise slowly but steadily and allow you to create a fresh financial start for yourself in the process.