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There are two types of bankruptcy available for individuals: Chapter 7 and Chapter 13. For someone that can manage paying back at least a portion of their overall debt, Chapter 13 bankruptcy is an excellent option. Here's a closer look at what you need to know about the approach. 

4 FAQ About Chapter 13 Bankruptcy

How does it differ from Chapter 7?

The biggest difference between Chapter 7 and 13 bankruptcies is the handling of debt. With Chapter 7 bankruptcy, the majority of unsecured debts are eliminated, including credit cards, personal loans, and electricity bills. However, there are restrictions on what property you're allowed to keep. 

With Chapter 13, the debt is repaid partially or fully with a court-set repayment plan. Property is exempt, so liquidation isn't necessary. 

How long is the repayment plan?

chapter 13 bankruptcyRepayment plans typically run for five years, but it can be set for as little as three if you're able to afford it without a financial burden. The payment amount is set by the court and is determined by your specific circumstances. All secured and priority debts are included in the total, while unsecured repayment amounts can be reduced. 

What types of debt are not dischargeable?

Bankruptcies can't include any type of priority debt — student loans, taxes, and child or spousal support. While you can't discharge these, you can break up the past-due amounts over the course of the repayment plan. As a result, it makes it easier to catch up on arrears without facing any legal repercussions. 

What property is exempt?

With Chapter 13 bankruptcy, you're allowed to keep property, including homes and vehicles. These exemptions apply even if you're behind on payments.

In fact, it can halt the foreclosure process as long as the sale of the home hasn't been completed yet. In such circumstances, homeowners begin making the regular mortgage payment and any arrears are added to the repayment plan. 

 

If you're considering filing for Chapter 13 bankruptcy, reach out to William C. Rieth to learn more about the process. The Rochester, NY-based attorney offers more than 25 years of experience in bankruptcy law. He's determined to provide a personalized legal approach to residents and businesses across Monroe County. Request a consultation today by calling (585) 232-6520.

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