Chapter 13 Bankruptcy
Many individuals who file bankruptcy do so under Chapter 13 bankruptcy laws. A Chapter 13 bankruptcy consolidates your debt, eliminates interest payments due to creditors and, in most cases, lowers the debt. This is all done under the protection of Federal Bankruptcy court. The individual who files Chapter 13 bankruptcy is then protected from creditors as that they cannot sue the individual to pay money or interest. The creditors have to take the amount given to them by the bankruptcy court and can not harass the debtor for additional money.
Filing Chapter 13 bankruptcy is similar to consolidating your debt with a debt consolidation company, but has many more advantages. Very few people realize that by consolidating their debt through with a debt consolidation company, they damage their credit just as they would with filing a Chapter 13 bankruptcy. Although the debt consolidation company is supposed to be a “free” service, as they are prohibited by law for charging, most of them charge a “donation” fee each month that, when accumulated, is a lot more than the filing fee needed in bankruptcy court. For this reason, if an individual is thinking about using a debt consolidation company, they are better off filing a Chapter 13 bankruptcy.
A Chapter 13 bankruptcy gives a debtor a chance to pay off their debt in a timely manner at an amount which the debtor can afford. Once the Chapter 13 bankruptcy petition is filed, creditors are prohibited from calling debtors and asking for money. The federal bankruptcy court protects the debtor and gives him or her time to pay off their debt without harassment. A trustee is assigned to the case by the bankruptcy court and the debtor must pay a certain sum each month, to the trustee, who will then apply it towards the debt. Funds to the trustee must be in certified or cashier’s checks and the name of the trustee must appear on the check.
Filing a Chapter 13 bankruptcy is not as difficult or as costly as filing Chapter 7. In addition, a Chapter 13 bankruptcy will not injure your credit as much as a Chapter 7 bankruptcy. For this reason, those with debt that has become unmanageable, but who have the means to eventually pay it off and who wish to retain some credit, choose to file a Chapter 13 bankruptcy.