While bankruptcy is truly a last resort, it can also be the light at the end of the tunnel that provides a path out of crippling debt. The effects of bankruptcy are harsh, but they can often be preferable to the overwhelming financial and psychological toll of long-term debt. Unfortunately, filing for bankruptcy is not necessary a simple process. One of the first steps is simply deciding whether to file for Chapter 13 or Chapter 7 bankruptcy, each of which has its own advantages, potential pitfalls, and path to recovery.
Whether you already know for sure you are going to meet with a lawyer to file for bankruptcy or even if you are simply considering it, there are many things you should avoid doing to keep your future self out of hot water. As with most legal matters, bankruptcy law is complicated and there are many rules you may not be aware of that you could inadvertently violate and make your case more challenging.
Debt got you feeling overwhelmed? Depending on your debt and assets, there are different types of bankruptcy available, if you meet the criteria. If you have been contemplating bankruptcy, here are 13 thing to know about filing for a Chapter 13:
1. What is a Chapter 13 bankruptcy? Chapter 13 bankruptcy enables people with an income to repay their debts over time.
2. It will buy you some time. Usually in a Chapter 13 bankruptcy, you will commit to a repayment plan that lasts around five years.
When you file for chapter 13 bankruptcy, the court will subtract your approved expenses from your income to determine the amount of money you must pay into your plan every month. Although it's highly likely this amount will stay the same throughout the life of your plan, here are two times when the court may order you to pay a higher amount.
The Court Discovered You Make More Money
The court requires debtors to report any income increases so their plan payments can be recalculated to ensure creditors get paid what they're owed.
There are times when finances seem to suffer from several issues all at once. If it seems like the adage "when it rains it pours" is referring to your wallet, then you may be the victim of poor financial planning along with just plain bad luck. You might be struggling to pay bills already, and then a car repair or unexpected medical bill hits you where it hurts. It's interesting to note how falling victim to emergency financial needs and the way people attempt to remedy the situation is connected with filing for bankruptcy.