This form of bankruptcy may be preferable for some individuals, although each case is unique. In Chapter 7 bankruptcy, for instance, the consumer's debt is almost entirely discharged. This may sound like excellent news, but your assets will be liquidated in order to repay the debt. In contrast to Chapter 13, your debt is reorganized so that you can make payments comfortably, and you are permitted to keep your assets.
Although many individuals may perceive this as a debt consolidation loan, it is not a loan in any sense. Only a restructured repayment plan is established, and the money is distributed to the creditors by a court-appointed trustee. Despite the fact that the consumer no longer has a contract with the creditors, the debt cannot be ignored. Certain debts are given precedence and must be paid in full.
If you have many assets, such as a home, that you do not want to lose to foreclosure, this form of bankruptcy can protect those assets. If foreclosure proceedings have already begun, the bankruptcy will prevent them from continuing. You may have delinquent mortgage payments that must be brought current, but they may shed their delinquent status if you bring them current. You must also maintain current mortgage payments.
This type of reorganization is predicated on your debt being restructured and rescheduled to make it simpler for you to make payments. This is accomplished through a variety of means, such as reducing the interest rate or extending the loan's term to reduce monthly payments. The objective is to enable you to make the payments, but at a reduced rate so that they can be made on time.
There are limitations on the quantity of debt that can be restructured under Chapter 13 bankruptcy. Your total unsecured debt must be less than or equal to approximately $307,000, and your total secured debt must be less than or equal to approximately $923,000. These figures are periodically adjusted to correspond with the consumer price index.
Before you can file for bankruptcy, you are required to undergo credit counseling. The counseling must be provided by an agency approved by the office of the United States Trustee. The companies may charge a fee for their services, but if you are unable to pay, they must reduce the cost and make adjustments based on your unique circumstances.
This allows individuals some financial breathing room to repay their debts without necessitating the liquidation of their assets. So that debts may be repaid, a viable repayment plan is developed. This works for consumers who are still able to make payments but have accumulated too much debt at a particular point in their lives.""
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