If someone has gone into personal debt, he or she will most likely file under Chapter 7 bankruptcy, however, Chapter 13 is an option as well. Under Chapter 13, the debtor is allowed a three to five year payment plan in which time he or she can pay back all debts.
Chapter 13 bankruptcy is also called a wage earner’s plan because it is specifically for those who have a high enough monthly income to pay back the debts. If the debtor’s monthly income is less than that of the state’s median, the plan will be three years, if it is higher than the state median, the plan will be five years.
Along with creating a payment plan for the individual, the courts also forbid any debt collectors from further pursuing the debts owed to them by the debtor during the length of time that the payment plan continues.
One of the most important advantages of filing under Chapter 13 is that it will save your home from foreclosure, adding mortgage payments to the payment plan.
Chapter 13 also “acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes them to creditors,” according to the U.S. Federal Courts web page. This form of bankruptcy protects the debtors from having to deal directly with the creditors.
Debtors also have the opportunity under Chapter 13 to reschedule secured debts and extend those payment plans over the length of time for the bankruptcy payment plan set by the courts. Lengthening the payment plan may lower the individual payments as well as simply give the debtor more time to pay.
If you are considering filing for bankruptcy, but do not know which Chapter to file under or where to begin at all, contact Arizona bankruptcy attorneys for assistance. These experienced bankruptcy attorneys will assist you in making the best decisions about your money and payments to keep your home and other in important assets Arizona today.