When most consumers hear a reference to bankruptcy, they think about a plan in which their debts are almost immediately eliminated and in which they may have to lose their homes or other assets. These are some of the elements of a Chapter 7 bankruptcy, although not every person who files for Chapter 7 ends up losing assets. There is, however, another type of consumer bankruptcy plan and that is the Chapter 13 plan.
As explained by the U.S. Courts, a consumer who files for a Chapter 13 bankruptcy does not see an immediate elimination or discharge of their debts. Instead, they engage in a structured repayment plan over the course of 36 months to 60 months depending on their circumstances. One of the big benefits of a Chapter 13 plan compared to a Chapter 7 plan is that assets, such as homes, are not able to be seized to repay creditors. It is for this reason that Chapter 13 bankruptcies are popular among homeowners.
During the course of the Chapter 13 plan, the consumer makes monthly payments to a trustee who, in turn, disburses payments to creditors as per the court agreement. Like a Chapter 7 plan, not all types of debt may be included in a Chapter 13 bankruptcy. Mortgages are one form of debt not included in the bankruptcy.
If you would like to learn more about the types of bankruptcy plans that may be available to you and how to select the right type of bankruptcy for your situation, please feel free to visit the consumer debt relief options page of our Kentucky bankruptcy website.