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How Chapter 13 bankruptcy can help reorganize debt

Chapter 13 bankruptcy is a personal bankruptcy option that allows the filing party to reorganize their debt into a manageable repayment plan that allows them to repay debts and enjoy relief from the stresses associated with overwhelming debt. Chapter 13 bankruptcy is referred to as a reorganization bankruptcy option and shares some similarities to other personal bankruptcy options but also differs in certain areas which is why it is important to understand.

Once the filing party has filed for Chapter 13 bankruptcy protection, an automatic stay goes into effect which prevents creditors from pursuing collection actions while the process progresses. The process allows the filing party to develop a repayment plan with the help of the bankruptcy court to reorganize their debts. Repayment plans are usually 3 to 5 years in duration. While not all debts may be included in the repayment plan, unsecured debts such as credit card debts not included in the plan are discharged at the end of the Chapter 13 bankruptcy process.

Once the filing party has filed for Chapter 13 bankruptcy protection, which will develop a repayment plan based on their income, they may find they no longer need the process if they experience an increase in income. Additionally, if they are not able to repay their debts according to the repayment plan, they may be able to seek an alternative such as filing for Chapter 7 bankruptcy instead.

While the bankruptcy process can seem complex at times, it does not need to be intimidating or cause anxiety and is instead intended to provide debt relief for struggling consumers. It is helpful to be familiar with the different personal bankruptcy options and to determine which is the best fit for the circumstances and challenges the filing party is facing so that they can enjoy a fresh financial start.

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