Chapter 13 bankruptcy is aptly named the “wage earner’s” bankruptcy plan. This is because it’s usually available to those who earn a decent wage and make too much money to qualify for Chapter 7 bankruptcy.
With Chapter 13 bankruptcy, you’ll be expected to make monthly payments to cover your debts. The payment amount will be determined based on your income and how much you can fairly pay back each month. The entire plan will last between three and five years. If you miss a payment at any point, the bankruptcy could be dismissed. Sometimes, a Chapter 13 bankruptcy can be changed to Chapter 7 if there is a good reason, such as the person losing their job.
If you do make all of your payments on time, then you will likely see any remaining debts included in the bankruptcy discharged after your final payment. At this point, creditors are no longer able to seek compensation beyond what they’ve received (so long as their debts were included in the bankruptcy plan).
What is a hardship discharge?
In some cases, you may want to look into a hardship discharge. This is designed to allow you to discharge the bankruptcy and remaining debts if events outside your control impact your ability to pay. For example, a severe illness or injury could be enough to get a hardship discharge. If you are badly hurt while working on a bankruptcy, you may want to talk about this option with your attorney.
Overall, Chapter 13 bankruptcy can be a good idea for some people, but it’s not right for everyone. You should look into its benefits and downsides before deciding if it is right for you.