There are numerous circumstances that can lead to financial difficulties. Many of these are unexpected and are not the actual fault of the individual. In today’s tough economy with rising inflation, it seems almost everyone is struggling to keep their heads above water. Then add an unforeseen event, such as job loss, divorce, or medical bills from an illness or accident, that can be devastating to an individual or family. Then there are people caught in a financial mess when their mortgage adjusts and they can no longer keep up with the payments. Maxed out credit cards with their high interest rates seem endless and unpayable. Perhaps the individual then turns to payday loans to kick the can a little further down the road, but in reality they are just delaying the inevitable. All of these things can contribute to financial disaster resulting in lawsuits, property repossession, wage garnishments, and foreclosures. The thing to remember is that doing nothing will not solve the problem, it will only make it worse. That is why the bankruptcy code was created. Filing for bankruptcy offers people relief from overwhelming debt while allowing them to keep their personal assets, such as their home.
Chapter 13 bankruptcy, also known as reorganization bankruptcy, was designed for individuals like these. Chapter 13 bankruptcy is typically filed by people who are employed, have large amounts of debt, and want to be able to pay off this debt over an extended period of time while still under the protection of the law. Chapter 13 really appeals to people who have a good deal of valuable personal property that they want to keep in bankruptcy. When a person files a Chapter 7 bankruptcy, he eliminates his unsecured debts, but he may lose personal property if it is not protected by the exemption laws. Certain property is exempt, but if the person has a lot of property or assets, some of it may not be exempt and may be sold in Chapter 7 Bankruptcy to pay off creditors. This is why a Chapter 13 bankruptcy may be more suitable for people who have non-exempt property that they want to keep. As long as the taxpayer has a regular and predictable income, then they are a candidate for Chapter 13. The taxpayer along with her attorney will present a workable payment plan with a term of three to five years to the bankruptcy court. Secured debts are paid first and unsecured debts get what’s left after priority debts are taken care of. At the end of the agreed term, if any unsecured debts remain, they will be eliminated in the bankruptcy discharge. At any time during the three- to five-year repayment plan, if the debtor’s financial situation changes, for example, if they take a pay cut or lose their job, Chapter 13 can be readjusted or converted to Chapter 7. This is why it is a popular option for many since the plan is very flexible and can be changed to suit the needs of the debtor. Filing for Chapter 13 bankruptcy will not only give you a fresh start, it will give you the opportunity to take control of your financial situation.
