Chapter 13 bankruptcy is an attractive option to many. This is primarily due to the fact that it allows you to keep your assets and items without having to worry about liquidation.
In exchange, you must meet and fulfill specific obligations. Thus, you should know what these obligations may be before you make your decision.
Organization of primary obligation
The United States Courts discusses everything you need to know about Chapter 13 bankruptcy. This includes your obligations as a debtor. Some are relatively straightforward. For example, you cannot proceed with the bankruptcy until you pay your filing and administrative fees.
After that, your primary obligation is to stick with your bankruptcy plan. You must prioritize your debts by order of importance as well. Priority debts should top your list. This includes things like missed employee paychecks, child support payment or alimony.
The order you repay your debts
Next, you should tackle and liens you have. Note that you also need to tackle any ongoing debts you have at the time, such as personal loans or mortgages. Unsecured debts go last. You pay them off to the equivalent of the assets you would have liquidated. This includes some of the most common forms of debt, such as credit card debt.
Depending on how your income compares to the state’s median income, you may have to repay your debts within a 3 or 5 year period of time. After successfully repaying your debts, you can work on rebuilding your credit. You can also learn tactics to avoid further debt during this time, which you can then implement in the aftermath.