Chapter 13 bankruptcy is a bit different than Chapter 7 bankruptcy in that it allows the filing party to reorganize and repay their debts according to a repayment plan that usually spans 5 years. This is different than Chapter 7 bankruptcy which allows the filing party to liquidate non-exempt assets to repay creditors. The ways to qualify for the two types of personal bankruptcy are essentially the opposite.
While qualifying for Chapter 7 bankruptcy requires that the filing party’s income is below a certain level, qualifying for Chapter 13 bankruptcy requires that the filing party has a reliable income to repay their debts according to the repayment plan. It is important to keep in mind that a Chapter 13 bankruptcy can be converted to a Chapter 7 bankruptcy is the filing party’s situation changes and that options are also available to exit the Chapter 13 process if the circumstances of the filing party change, allowing them to repay their debts.
Any party filing for personal bankruptcy protection should also be aware that an automatic stay immediately goes into effect once they have filed for either type of personal bankruptcy protection which prevents further creditor collection actions during the bankruptcy process. This can oftentimes come as some measure of relief to a party considering filing for bankruptcy. There are additional requirements the filing party must meet to qualify for Chapter 13 bankruptcy including debt limits, that the proposed repayment plan will repay all required debts and other important requirements to be familiar with.
Chapter 13 bankruptcy can help individuals struggling with debt repay their debts over time which makes it a valuable tool for those dealing with the stress of overwhelming debt. Personal bankruptcy options generally provide important protections for struggling consumers and provide them with beneficial options they should be familiar with to enjoy financial freedom.
Source: Bankruptcy.findlaw.com, “Who Can File for Chapter 13 Bankruptcy?” Accessed May 18, 2018