Debt problems can be complicated. This is especially true for secured debts or priority debts like taxes. Debt relief through bankruptcy can help. Make sure you ask these Chapter 13 bankruptcy preparation questions. Take the time to speak to a bankruptcy attorney in Dayton about what to expect.
Chapter 13 Bankruptcy Preparation Questions
First, how is Chapter 13 different than Chapter 7? In Chapter 7 your assets are at risk of liquidation. This is because they use nonexempt assets to satisfy the debt to creditors. A Chapter 13 allows you to keep all of your property. Rather than liquidating assets, you repay the debt. Therefore, a Chapter 13 works better for mortgage or car loan debt. You can keep your home and/or car while you make payments to resolve your debt. Also, Chapter 13 may allow you to resolve debts that are not eligible for Chapter 7. These are priority debts such as unpaid taxes, some student loans or back due domestic support payments. However, these types of debt are special and are not guaranteed even in a Chapter 13.
Second, how does the Chapter 13 plan work? When you file for Chapter 13 you submit a repayment plan to the court. The court looks at your income, expenses and your total debt owed. They review the estimated monthly payment to make sure it is affordable. The court does not want you to enter a plan payment that is too high for your monthly income and living expenses. These payments are spread out over a period of three to five years. Once your payment plan is completed your case is discharged.
Last, why choose Chapter 13 over other debt relief options? The biggest reason is the automatic stay. This is a court order that halts collections, foreclosures and repossessions. While you work to develop your payment plan your assets are protected from creditors. A debt consolidation loan or debt management plan cannot offer that legal protection granted by a Chapter 13.