Each type of bankruptcy can produce similar outcomes, but each is also different in their own ways. In general, there are several common questions asked by people pursuing each type of bankruptcy. Chapter 13 tends to carry the most mystery for filers as there is more involved and required of the debtor in this type of bankruptcy case.
How does the payment plan work?
The biggest issue of concern among bankruptcy filers is how the Chapter 13 repayment plan works. Many people fear they will be stuck paying several payments to multiple creditors out of their insufficient income. The payment plan typically includes all of the debts and is paid in one lump sum each month. While the plan does pay the creditors, it doesn’t necessarily require the debtor to do so. Instead, the debtor can opt to have the bankruptcy Trustee pay creditors on their behalf.
What happens to my assets?
Most people fear filing for bankruptcy because of several misconceptions such as the risk of losing assets. While this does happen in some situations, it is rare in a Chapter 13 case. The reason is that the repayment plan negates creditors rights to seizure or repossession of assets. As long as payments are being made according to the Chapter 13 plan, the debtor’s assets are safe.
How will my credit be affected?
While a bankruptcy itself does not directly damage a debtor’s credit standing, the notification of the filing is visible for future creditors to see. It isn’t uncommon for debtor’s to see an increase in their credit standing following a bankruptcy, but they may also experience some hesitancy by future lenders. However, Chapter 13 bankruptcies are looked at more favorably than Chapter 7 since the debt were repaid rather than eliminated.