What is a Chapter 13 Bankruptcy? How does it work? How does it look on my credit? These are all wonderful questions with straight forward answers. Here are some Chapter 13 facts you will find useful.
First, Chapter 13 Bankruptcy is a government sponsored debt consolidation plan. Unlike traditional debt consolidation plans, Chapter 13 creditors MUST stop collecting from you once the Chapter 13 Bankruptcy is filed with the bankruptcy court and during the Chapter 13 case. That is not true in traditional debt consolidation plans where creditors are not bound by the plan. One of your 10 creditors can say piss on this, I will just garnish your wages and there is nothing you can do about it. That cannot happen in a Chapter 13 Bankruptcy.
Second, in the vast majority of Chapter 13 plans, the debt does not get paid in full. Far from it! Let say you have 100k in credit card debt but only 10k gets paid. 90k in debt gets wiped out, forever, tax free! POW! That is seriously cool stuff right? It gets better. While you are making your payments back to a Chapter 13 trustee, no creditor can collect from you.
Third, believe it or not, doing a Chapter 13 Bankruptcy looks worse on your credit than doing a Chapter 7 Bankruptcy where you don’t pay creditors. Why? Because in a Chapter 7 Bankruptcy, you are debt free in as little as 4 months. Chapter 13 plans are minimum 3 years and a maximum 5 year plans. Your credit doesn’t heal until the end of the plan. There are plenty of great reasons to be in a Chapter 13 plan, but credit improving fast is not one of them.
When the time is right, or when you are ready, reach out to Minnesota’s highest google reviewed and most recommended bankruptcy law firm at www.kainscott.com. You will be so glad you did!