When you are feeling the pressure of heavy debt, you will undoubtedly want to find some sort of debt relief as soon as possible. You will probably also want to discharge as much debt as you can all at once.
However, rapid and complete debt discharges made possible through bankruptcy is not always the only or correct choice. You may want to consider Chapter 13 bankruptcy and its ability to help you repay your debt over time.
How Chapter 13 Debt Restructuring Works
The goal of Chapter 13 bankruptcy is coming up with a debt relief plan that allows you to gradually pay off some of your debt. This is a pretty clear counterpart to Chapter 7 bankruptcy, which generally tries to discharge as much unsecured debt as possible in one swoop. At a glance, Chapter 7 seems like the way to go if you have large debts. Why would you want to choose Chapter 13, then?
By repaying some of your debt, you will be more likely to stay in good standing with creditors, lenders, financial institutions, and any other parties that may have reason to access your credit history. The impact on your credit score when you file for Chapter 13 bankruptcy may also be much smaller than any other form of bankruptcy. Plus, you stand to lose less assets to liquidation. Basically, people notice and appreciate when you try to correct your financial situation as much as you can on your own.
Here is a basic explanation of how Chapter 13 works:
- You contact a bankruptcy attorney to discuss your financial situation, i.e. your debt, income, and necessary expenses.
- After a discussion of your options, you decide to use Chapter 13 bankruptcy.
- Your bankruptcy lawyer helps you create a repayment plan you can bring to your creditors and the bankruptcy court.
- Your repayment plan should start by finding ways to reduce your total debt owed to your creditors.
- The debt that remains after reduction is divided into monthly payment increments that last anywhere between 36 and 60 months, with a focus on feasibility.
- If the court and creditors approve your repayment plan, then it is enacted as planned.
- You make an honest effort throughout the plan to be fiscally responsible, set money aside, and pay your owed debt according to that plan.
- When the repayment plan period ends, any debt still remaining may be discharged by the court, assuming you made an honest effort to repay as much as possible.
Your bankruptcy lawyer can help you convince your creditors to accept your Chapter 13 bankruptcy plan. For the most part, creditors should be willing to work with you since getting some part of your owed debt repaid is infinitely better than getting none.
For more information about Chapter 13 bankruptcy in Texas, you can call the Law Offices of W. David Stephens in Lufkin at (936) 298-5388.