When many people consider bankruptcy, they think they’ll need to sell all of their assets as a part of the process. That simply is not true when it comes to Chapter 13 bankruptcy. Unlike Chapter 7, which is often referred to as the “liquidation” bankruptcy, Chapter 13 is referred to as the “reorganization” bankruptcy. Rather than serving as a debt elimination strategy, it’s a way to reorganize debt to make it easier and more manageable for the debtor.
Borrowers who are struggling to repay their debts may be able to qualify for Chapter 13 “reorganization” if they have a regular and dependable income that is sufficient to pay off a certain percentage of their debts over a period of three to five years. During this three- to five-year period of time, the borrower will make one, payment to the bankruptcy court every month in an amount determined as part of the bankruptcy process. The bankruptcy court will then distribute this payment among the various creditors to gradually pay off the borrower’s debts.
Once the three- to five-year plan has finished, if the debtor successfully makes all the monthly payments, whatever debts remain that were covered by the bankruptcy will be discharged. The debtor will then have a clean financial slate as it pertains to those debts, and he or she can continue with a more financially responsible and debt-free life.
If you’re curious to know if you and your family may be eligible for Chapter 13 proceedings, you might want to look into the various requirements of this helpful process. A local King County bankruptcy attorney will be able to assist you in reviewing your eligibility in this regard.