Chapter 13 bankruptcy is one of the most common routes taken by debtors. The solution it provides fits the majority of people who are heavily burdened by the active repayment of multiple major debts. While bankruptcy has inevitable negative consequences, there are also significant benefits to filing for bankruptcy under Chapter 13 that make it more appealing than alternative approaches.
Most people who file under Chapter 13 are able to pay back some of their debts but cannot afford to pay off all of them. Chapter 13 bankruptcy involves restructuring debts and creating a plan to repay at least a portion of the total debt owed, including back-payments on auto loans and mortgages. This form of debt reconstruction helps most pay off a set majority of their debt in 5 years' time. Chapter 13 bankruptcy allows a debtor to protect their assets and possessions, rather than having to liquidate or sell all assets in order to repay debts. (As a result, this form of bankruptcy is often pursued by debtors whose homes are under threat of foreclosure.)
Theoretically, a Chapter 13 bankruptcy can also eliminate any number or amount of unsecured debts. This excludes secured debts such as mortgages, car loans, student loans, and back-payments on alimony and child support.
Relative to other forms of bankruptcy, a Chapter 13 bankruptcy causes lesser damage to your credit over time. A Chapter 7 bankruptcy stays on your credit report for 10 years or more, but a Chapter 13 will only show up for 7 years. This minimizes the time it takes debtors to financially recover, begin building credit, and have access to financing options without painfully high interest rates.
If you are considering filing for bankruptcy, enlist the help of our Richmond bankruptcy attorney at Bruce W. White, P.C. We are prepared to help you assess your financial situation and choose the best path forward.
Call us now at (804) 655-0502 or send us your information to receive a free consultation today.