A Chapter 13 bankruptcy is a type of federal bankruptcy protection Indiana residents can seek out if they have run into financial problems.
Basically, in a Chapter 13, a debtor proposes a plan under which they will make one monthly payment toward their debts over 3-5 years. If the court approves the plan and if the debtor follows through on the payments, they get their debts discharged.
Among individual debtors, Chapter 13 is less well-known than Chapter 7 bankruptcy. One reason is that Chapter 13 generally takes longer than a Chapter 7.
Also, in a Chapter 13, a person will usually wind up paying more money out of pocket to their creditors than they would had they filed a Chapter 7.
However, there are many good reasons a resident of the greater Indianapolis area might want to file a Chapter 13 bankruptcy.
- In some cases, a family struggling with debt may not be able to file for a Chapter 7 because of their recent income. Effectively, if these families want bankruptcy protection, they will need to file a Chapter 13.
- Chapter 13 is much more effective for helping debtors who are behind on house payments. A person may use a Chapter 13 plan to catch up on overdue mortgage payments. If the person completes the plan, they can avoid foreclosure. By contrast, a Chapter 7 can slow down a foreclosure, but it will not stop one.
- A Chapter 13 bankruptcy comes off of one’s credit report more quickly than a Chapter 7. On a related point, if they will consider a Chapter 13, a debtor is allowed to file subsequent bankruptcies more frequently.
- Those who are operating a business in their own name can use a Chapter 13 to continue their business’s operations while they deal with problematic debt.
- There are other situations, such as if someone has negative equity or multiple liens on their home or vehicle, where filing a Chapter 13 could reduce debt or improve one’s financial circumstances.
An Indianapolis family in debt should consider Chapter 13 as an option
A Chapter 13 bankruptcy is not the best option for all families. Whether it is a good alternative will depend on the family’s personal and financial circumstances. Still, families will want to discuss Chapter 13 as one of several alternatives if they are struggling with debt.