Debts are tricky business. Although debts can be beneficial to an extent, having too much debt or debt that cannot be repaid in a timely manner can quickly turn into a problem. While repaying debts is a responsibility, there are instances in which financial hardships result in the inability to satisfy this obligation.
Chapter 13 Bankruptcy
When considering personal bankruptcy there are two options: Chapter 7 debt elimination and Chapter 13 debt reorganization. Although most people tend to seek complete debt elimination, not everyone will qualify or even benefit as they would expect from Chapter 7. Filing for Chapter 13 can be a better option for many people.
Most people assume that Chapter 13 requires full debt repayment. While there are many instances in which people do repay the full amount of debt owed, it is not always the case. A Chapter 13 repayment plan can help reorganize debts in a way that allows for repayment with either lowered, or eliminated, interest fees and even lowered principal amounts owed. Depending on the debtor’s income, nature of the debt and value of assets, the court may allow for full or partial repayment through a Chapter 13 plan.
One of the biggest benefits of filing Chapter 13 is the ability to include secured and unsecured debts into a single payment plan. Including secured debts ensures the debtor gets to keep possession of the asset while they work to repay the creditor. Although Chapter 13 may take longer to complete, the debtor is usually left with less credit impact and in a better position to continue their current accounts after the bankruptcy is complete.