Filing chapter 13 bankruptcy is usually one of the last resorts for those facing debilitating financial circumstances. It is generally the last thing anyone wants who has tried to protect their financial investments, credit histories and future fiscal stability. However, there are times when choosing to use the protection provided through a chapter 13 bankruptcy filing may be the right move in order to stop the snowballing effect of clamoring creditors and foreclosures. For whatever reason a person finds himself in the paralyzing position of burdensome debt and crushing pressure, there are solutions that can be employed to regain security, restore credit and remove obstacles that hinder a prosperous future.
Many people find themselves dealing with unforeseen circumstances such as long-term illnesses, employment lay-offs or personal tragedies such as divorce. Sudden tragedies can alter the fiscal status of a family very quickly and send the family finances spinning out of control. In order to regain control and to alleviate the pressure caused by defaulted payments and persistent creditors, many consumers have had to consider using the legal measures provided through bankruptcy court. There are two types of legal fillings that can be made through the courts that address individual issues. Chapter 7 and chapter 13 bankruptcy has been set up by law to provide a system of repayment to creditors as well as financial protection for consumers who are trying to rebuild their crumbling finances.
Chapter 7 applies to the liquidation of assets in order to repay creditors while also imposing an automatic stop on collections until the court instructions are carried out. This allows creditors to receive at least some of what is owed them while also protecting the consumer from accruing more financial problems. Chapter 13 bankruptcy filing is a reorganization of finances on behalf of a consumer in order to repay debt as well as provide protection for some of their property such as a personal home. In this case, a consumer files a reorganization strategy to the court that agrees to legally appointed oversight of a personal budget and any liquidation of assets that are deemed reasonable.
The benefits of filing chapter 13 bankruptcy often outweigh the chapter 7 alternative in that some assets may be retained, a repayment plan is implemented and it is usually paid off in up to 5 years, if not sooner. Some debt is required to be paid off completely, some may be paid off by a percentage of the total debt and others may be forgiven. There is a mandatory budget required by the courts when a chapter 13 bankruptcy is filed that must be followed to the letter. A plan for repayment is set up that may include wage garnishments and management of how a person can spend his or her money during the repayment plan. An appointed representative of the court will be provided that oversees transactions and makes sure that creditors are repaid on a schedule according to the earnings of an individual.
For those who carefully follow the repayment process as outlined by the court as a result, debt will be resolved and many creditors will be willing to extend credit again. This type of court managed financial resolution is more appealing to creditors and lenders which will be useful to those who are committed to restoring their future options. Consumers who file chapter 13 can expect to have it show up on the credit history for at least 6 years. It is less damaging for credit purposes than for those who file for chapter 7 bankruptcy, in that these cases usually receive poor credit standing for 10 years following court proceedings. Although filing chapter 13 bankruptcy allows greater protection for assets and offers a payment plan for creditors, there are some debts that cannot be forgiven by law. Alimony, back taxes, child support, any hidden debts not reported at filing and most student loans are some of the areas that are required to be repaid no matter what the situation.
Most individuals who are considering which avenue to take, prefer chapter 13 because of the shorter penalty on their credit history, greater protection for assets and court imposed solutions for repayment to creditors. While this option may be a bit more appealing, choosing chapter 13 bankruptcy is not a magic bullet for clearing up troubled, personal finances. If possible, it is always best to manage personal finances with commitment to fiscal freedom and integrity. There are, of course, times when no matter what a person does, tragedy strikes. When it does, only God and good, personal choices based on biblical principles can bring anyone out of the stress and pain of imminent financial ruin. "The young lions do lack, and suffer hunger: but they that seek the Lord shall not want any good thing." (Psalm 34:10) While filing chapter 13 bankruptcy may not be the first choice for fiscal resolution, it may be a solution that can provide a plan and give hope for a stable, fiscal future.
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