If you earn regular income or own assets, you may consider filing for a Chapter 13 bankruptcy, which initiates a court-approved payment plan. As noted by Bankrate.com, your unsecured creditors may then receive the money you owe them over the next three to five years.
Before finalizing the terms of a payment arrangement, the court consolidates your debts, such as your outstanding credit card and medical bills. A trustee then determines how much you may reasonably afford to pay based on your monthly income and basic living expenses.
Which debts are eligible for a discharge?
As noted by the U.S. Courts website, the debts included in your payment arrangement may end up discharged when the Chapter 13 payment term is over. This generally means that creditors no longer have a right to collect on any portion of the balance left unpaid.
Taxes, student loans and debts incurred through civil or criminal actions, however, do not qualify for a discharge. You may still owe money on a car loan or a mortgage, which you need to continue making payments on.
What property and assets may I keep?
A Chapter 13 bankruptcy generally allows you to keep your home and other valuable assets, such as your personal belongings and a retirement portfolio. If you plan to keep your vehicle for work, however, you may need to reaffirm your auto loan with its service provider.
The court may require documentation from your car’s finance company to confirm the amount of your current monthly payment arrangement. The reaffirmation procedure may alter the terms of your current payment plan to a more affordable amount, and may also prohibit repossession.