The Key Differences About Chapter 13 Bankruptcy

If you're considering bankruptcy as a way to get debt relief, know that there are several forms of bankruptcy that you can pick from. One that may be best for you is Chapter 13 bankruptcy. Here are the key differences about using this form of bankruptcy over the others. 

Debt Adjustment

The basics behind Chapter 13 bankruptcy is that it allows you to adjust your debts rather than completely discharge them. It is designed for people that are currently employed and have the ability to pay back their debts over time with a little bit of help. Creditors will not have their debts completely discharged, which means your creditors are less likely to object to the bankruptcy filing.

Your debts will end up being consolidated, which will make it easier to pay off the balance. You will make a single payment to repay those debts each month, and the payment will be distributed accordingly. 

Interest Discharge

While your debts won't be discharged in Chapter 13 bankruptcy, it is possible that your interest will be. Your income level will essentially decide what happens to existing interest that you owe, and if you will pay interest on the debts in your repayment plan. However, even if you do have to pay interest on your repayment plan, know that you'll be paying a lower interest rate than what you were paying before you filed for bankruptcy. 

Asset Saving

Many people that use Chapter 13 bankruptcy use it because they have several high value assets that they want to hold onto. For example, they may have an existing mortgage or a vehicle loan, and they don't want to lose those items due to filing for bankruptcy. Chapter 13 gives people the ability to keep those high value items instead of liquidating them to pay debts. 

Credit Impact

Chapter 13 bankruptcy will have an impact on your credit if you use it. However, the length of time is not nearly as long as other forms of bankruptcy. Expect Chapter 13 bankruptcy to stay on your credit report for about 7 years. What this means is that a lender will see that you went through bankruptcy if you apply to receive credit, such as opening a new credit card or even signing up for a service where you are given free equipment. The lender may see you as a higher risk and deny you services because of this. 

If you want to learn more about chapter 13 bankruptcy law, contact a reputable lawyer near you.