Debt is a burden that can severely impact your life. When bills and loans pile up, it can seem impossible to get out of debt.
If you are buried in debt, you may be considering filing bankruptcy. This can be intimidating, but it can be a positive step toward improving your life. If you have money to pay some of your debts, Chapter 13 bankruptcy may be a reasonable option for you.
Wage earner’s bankruptcy
Many people call Chapter 13 bankruptcy “the wage earner’s plan” or “wage earner’s bankruptcy” because you need to have some income in order to qualify. Filing Chapter 13 will not completely erase your debts. Rather, it involves making a plan to pay all or part of them over time.
When repaying debts under Chapter 13 bankruptcy, you make payments to a single trustee over a three- to five-year period. During this time, your creditors may not contact you or make any further attempts to collect debts.
Debt prioritization
There are three different types of debt: priority, secured and unsecured.
Priority debt includes tax debt and child support. Under Chapter 13, you must pay these debts first, and you must pay the full amount.
Secured debt involves collateral. Examples include auto loans and mortgages. If you want to keep your house or car, you must pay at least the value of the collateral.
Unsecured debt includes loans without collateral and credit card debt. How much you pay under Chapter 13 generally depends on your income.
Debt does not have to ruin your life. If you have a source of income, filing for Chapter 13 bankruptcy can help you regain control of your finances.
