For those facing a financial crisis that includes debts that have grown and may feel out of control, but have a stable and reliable source of income, one of the personal bankruptcy options that are available may be able to help. Chapter 13 bankruptcy is a personal bankruptcy option that allows the filing party, with a reliable source of income, to reorganize their debts and repay them over time.
Chapter 13 bankruptcy is an option that takes into account the filing party’s income when establishing a repayment plan. The filing party works with the bankruptcy court to reorganize their debts and create a repayment plan that is based on the filing party’s income and what they can pay. The period of time that the filing party has to repay their debts according to the repayment plan is usually a 3 to 5-year period. Once the filing party has completed the repayment plan, they may enjoy a debt discharge.
This allows the filing party more time to repay their debts and can include repayment at a lower interest rate or may be able to help save a family home. As has been discussed recently on this blog, there is also an automatic stay of collection actions during the bankruptcy process which provides breathing room for the filing party as creditors are not permitted to pursue collection actions during the automatic stay.
Additionally, it is important to note that if the filing party needs to convert the bankruptcy to another personal bankruptcy option, that may also be possible depending on the circumstances. There are many options for struggling consumers facing a financial crisis to consider which is why they should understand all their bankruptcy protection options and how they work.