Managing your personal finances has continued to become more challenging in recent years. Due to increasing inflation, high costs of necessities, and flat wages for many workers, even financially conservative people can start to fall behind. For those that are in debt and need to find a way out, filing for bankruptcy can be a great option. For those that are in the Dayton, OH area, a great form of bankruptcy to consider filing is Chapter 13. It is important to understand the differences between Chapter 13 and other options, notably Chapter 7.
Main Differences Between Chapter 13 and Chapter 7
Both Chapter 7 and 13 bankruptcy filings intend to help people get a fresh start with their financial lives. However, the way that it is handled differs greatly. With a Chapter 7 filing, you will likely receive a full liquidation and charge-off of unsecured debts. When this happens, any bank accounts, liquid investments, and many tangible assets will need to be sold. The proceeds will then be used to pay off creditors as much as possible. The balance is then typically discharged through the bankruptcy court.
A Chapter 13 filing is different from a Chapter 7 because it more focuses on reorganizing your financial life. As opposed to liquidating all of your assets and discharging your debt, the court will first attempt to consolidate your debts and have you enter into a bankruptcy repayment plan. If you are successful at following the repayment plan, you could have some debts discharged in the future.
Debts That are Not Discharged in Chapter 13
When you are going to file for Chapter 13 bankruptcy, some of your debts could eventually be discharged. However, some will not be permitted to be discharged through this type of filing.
Secured Debts
The most common type of debt that will not be discharged through a Chapter 13 filing is your secured debts. Any type of loan that you have taken out to purchase a major asset will be considered a secured debt. These typically include mortgages, auto loans, or cash-secured loans. If you do fall behind on these payments, the lenders could seize the assets and hold you responsible for any remaining balance that is owed after liquidation. If this occurs, the remaining balance owed will be considered unsecured debt.
Unsecured Claims that Cannot Be Discharged
Another type of debt that you will need to repay is priority claims. While these debts will not have any tied collateral, there are some forms of debt that cannot be extinguished. Some forms of priority claim that are not extinguished with a Chapter 13 filing include past-due child support, alimony payments, personal injury claims, and some types of taxes. Also, if you have taken out student loans, the balance may not be discharged in any form of bankruptcy.
Types of Debts that Can Be Discharged in Chapter 13
While there are various forms of debts that cannot be discharged when filing Chapter 13, there are still many forms that can be discharged if you do stay current with your repayment plan. Some common forms of debts that could be discharged with your Chapter 13 filing include the following.
Credit Card Debt
Due to the high rate of interest and general accessibility, accumulating credit card debt continues to be a problem for many consumers. If you have a significant amount of credit card debt, you will be pleased to know that it can be discharged with either a Chapter 7 or 13 filing. Whatever balance that remains at the end of your repayment plan could be discharged.
Medical Bills
The high cost of medical care today has put many people in challenging financial positions. Even if you have health insurance, you could incur significant expenses for a procedure or routine care. If you have past-due medical bills that have not been forgiven already, the outstanding balance can eventually be discharged under a Chapter 13 filing.
Payday Loans
The use of payday loans can help someone pay for a financial emergency. However, considerable interest rates and fees can easily get someone trapped in a debt cycle that they are not able to get out of. If you have declared Chapter 13 bankruptcy and have payday loans outstanding, they could eventually be discharged after you reach the end of your repayment plan.
Other Unsecured Claims
Overall, if you have unsecured personal loans outstanding, they could be extinguished through your Chapter 13 filing. Some other debts that are frequently forgiven include personal loans, past due rent or utilities, or any other type of debt that you took out that does not have a priority claim.
If you are facing serious financial challenges, filing for bankruptcy could be your best option. If you are considering bankruptcy, hiring Chapter 13 bankruptcy lawyers in your area could be a great option. There are a lot of complexities that come with bankruptcy law and knowing that you are properly represented is very beneficial. Your legal team will offer you a full consultation on your case so you are aware of the benefits and drawbacks that come with filing any form of bankruptcy. They can also help you determine if Chapter 13 is the right option and handle any filing, notifications, and discussions with creditors. Ultimately, this can help ensure you receive a favorable outcome and are able to rebuild your financial life.
