When you think of bankruptcy, you may have visions of losing everything you own. Media depictions often involve people forced to sell homes, cars, jewelry and other valuables to pay outstanding debts. However, this is not the case, especially if you file for Chapter 13 bankruptcy.
The purpose of bankruptcy is to satisfy debts and get yourself on a stronger financial footing. Wiping away the debt that bogs you down through a Chapter 13 restructuring plan may prove a better option in the long and short term. While you may want to cut ties with some property, Chapter 13 makes it, so you do not have to.
What is debt restructuring?
Chapter 13 is unique because it allows you to pay back a portion of your debt through restructuring. The trustee goes through your secured debts or those with collateral such as homes and vehicles. Next, the trustee uses your income and calculates a reasonable way to repay anything you wish to keep. In some instances, you may decide to return or sell items to help pay. However, with a debt restructuring, you do not have to.
How long is the payment plan?
Once the trustee develops a plan, the court decides how long you must pay it. Most Chapter 13 payment plans last between three and five years. The length of time depends on how much debt you owe. Five years is the maximum time for a Chapter 13 payment plan. When you complete the terms of your plan, the judge discharges any remaining debt.
Getting a fresh start with your financial situation is possible. Bankruptcy is not ideal, but it allows you to learn from your mistakes and forge a better financial future.