When a person in Washington considers filing for bankruptcy, their mind may automatically go to Chapter 7 bankruptcy. Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” involves the sale of a debtor’s non-exempt assets to pay off the debtor’s creditors. The entire process is usually completed in a matter of months, leaving the debtor free to move forward on fresh financial footing. However, it may be worthwhile to consider the lengthier Chapter 13 bankruptcy process.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is also referred to as a “wage-earners plan.” Instead of selling non-exempt assets, a person who files for Chapter 13 bankruptcy keeps their assets. Instead, the debtor enters into a court-approved plan in which they pay a set amount to a trustee each month for three to five years, and the trustee uses these funds to pay back the debtor’s creditors. At the conclusion of the plan, many of the debtor’s remaining debts are discharged.
What are some advantages of Chapter 13 bankruptcy?
Chapter 13 has some advantages over Chapter 7 bankruptcy. First, it may give the debtor a chance to keep their house. This is because filing for Chapter 13 bankruptcy stops the foreclosure process and the plan gives the debtor time to cure delinquent payments over the length of the plan. Chapter 13 bankruptcy also allows a debtor to reschedule secured debts, extending them over the length of the repayment plan, which may lower payments. In addition, Chapter 13 bankruptcy protects co-signers. Finally, you can compare Chapter 13 bankruptcy to a consolidation loan, in which a person pays one set amount each month, rather than making separate payments to their many creditors.
Learn more about Chapter 13 bankruptcy
Chapter 13 bankruptcy is one bankruptcy option that debtors may want to consider. This post is for educational purposes only and does not contain legal advice. Those who want to learn more about Chapter 13 bankruptcy are encouraged to explore our firm’s Chapter 13 webpage for further information.