What Happens When You File Chapter 13 Bankruptcy ?
Most people usually think going bankrupt is losing everything, selling all their assets and then starting over from the beginning. Actually, bankruptcy is intended to help debtors, even in bankruptcy liquidation; people are able to hang on to some assets, as many of their debts are forgiven. |
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But most people file under Chapter 13 as it prevents home foreclosure. In this type of bankruptcy, the person makes monthly payments to the trustee who is appointed by the bank, and then the trustee distributes the payments to the creditors.
The person should make a statement of his income, assets, debts and different obligations. The debtor meets the creditors and decides how he or she can best pay back their debts. Those which are delinquent are usually renegotiated to a lower rate of interest, some late are fees forgiven. Long period or monthly payment schemes are sometimes finalized.
The person can either pay back his debts in cash or he can liquidate his assets for paying back the debts, then it would get converted under Chapter 7 bankruptcy. A filing of Chapter 13 bankruptcy will always remain on individual’s credit report for about seven years, and so will the debt that has been charged off by the creditor.
Loan and mortgages are usually difficult to get, for some years. Even if he gets, the interest rates on loans will at least be two to three times higher than that of a person of same credit score and no bankruptcies as long as he satisfies the terms and conditions of the Chapter 13 restructuring plan and pay all his bills on time, he slowly gets back all the credibility that he had prior to filing for bankruptcy.
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There are several ways one can file his bankruptcy under different chapters. There are different options to examine chapters of bankruptcy. The three chapters are – Chapter 7, Chapter 11, and Chapter 13.