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Can a Chapter 13 bankruptcy help with your financial problems?

If you are considering bankruptcy, you have two types of filings available: Chapter 7 and Chapter 13. Each has its pros and cons, as well as specific eligibility requirements.

Whether a Chapter 13 will effectively solve your issues can depend on several factors, including your income, the type of debt you have and your financial priorities. Speaking with a qualified lawyer can give you more information about potential solutions for the financial issues you face.

Chapter 13 is based on a repayment plan

In the course of a Chapter 13 proceeding, the trustee will set up a repayment plan. In many cases, there can be room for negotiating terms, so your lawyer can work out an agreement suitable for you. Most repayment plans take between three and five years to complete.

Depending on factors such as the type and amount of debt, as well as your income, you may end up repaying all of your debt or part of it. If you stick to your end of the agreement and make payments on time, most debt remaining after the plan ends will be discharged.

Your plan may not cover some types of debt

Generally, you will remain on the hook for child support, student loans, some types of tax debts and some debts resulting from criminal or civil judgments against you. The rules about which debts you can discharge can involve some complexity, so be sure to discuss any such situations with your lawyer.

Keeping your property

One major advantage of a Chapter 13 is that you do not have to sell your property. You can keep vehicles, houses and other properties so long as you keep up with payments. You may also have the option of giving up a piece of property if continuing payments would be too burdensome.

Income requirements

On the other hand, getting a Chapter 13 petition approval means meeting certain income requirements. The basic idea is that your income should allow you to make payments every month, after you have paid for life necessities such as food, shelter, education and transportation. Thus, courts want to see a consistent income that will let you make reasonable payments. There is no set amount, as this depends on the cost of life necessities and the amount of debt you have.

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Paul Urich
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