Life during Chapter 13
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Living with unmanageable debt can strip away your quality of life. If you’re dealing with debt collectors, have been threatened with foreclosure or repossession, and aren’t sure where to turn, Chapter 13 bankruptcy might be the best solution to get your finances back on track. This type of Wilmington bankruptcy puts you on a repayment plan that lasts three to five years. By the end of your plan, you’ll be caught up on your secured debt and have restored your financial footing.
Three to five years is a long time to stick to the strict budget required by the bankruptcy court, but if you can do it, the results should be life-changing. Some questions we’re often asked by clients include: what is life like during the bankruptcy process, how tough is it to meet plan requirements, and what does life look like once it’s done. Here are answers to some of these frequently asked questions.
It’s a process
Compared to Chapter 7 bankruptcy which takes just a few months from start to finish, Chapter 13 is a more significant commitment. Because the court requires you to devote all of your disposable income to pay your debt, life during Chapter 13 means your money is essentially spent before you earn it.
For some, it can be tough to devote years of their life to the plan, but for those that complete the process, the rewards are great. If you achieve your discharge, you’ll be current on secured debt like your mortgage and car loan and clear of much of your unsecured debt.
You still must pay your bills
While you are in a Chapter 13 bankruptcy, you must pay the bills that are not included in your repayment plan. This includes things like current payments on your mortgage, car payment, child support and alimony, property taxes, etc.
You also must pay your bills including your utilities, car insurance, etc. On top of your monthly obligations, you must pay installments on your repayment plan. This goes towards past-due balances on your mortgage, car loan, support obligations, recent income taxes, etc.
Your budget will be tighter
During a chapter 13 bankruptcy, you won’t get much leeway with your funds. Your bankruptcy attorney sets up the plan based on your income, expenses, and past-due secured debt balances. The Trustee assigned to your case must approve the plan.
This means that pricey vacations and expensive purchases are out of the question. And if you do get a raise, significant bonus, or another cash windfall during the plan, you must notify your attorney and Trustee of the additional income and your plan might be modified to absorb these additions.
You can’t get new credit
During your Chapter 13, you can’t take on any new credit without the permission of the Trustee assigned to your Wilmington bankruptcy case. If you need a new car or a credit card for travel for work, you must request permission from the court.
To be approved for new credit during your bankruptcy, you must prove it is essential, like if your car got damaged in an accident and you must have one to commute to work. You must prove that the new debt is critical and that you can afford to repay it and keep up with your repayment plan.
While completing the Chapter 13 bankruptcy process can be rigorous, it also comes with significant benefits. Those that follow Chapter 13 through to discharge will be current on secured debt and will see remaining balances on unsecured debt like credit cards and medical bills discharged. A successful bankruptcy sets you up for a brighter financial future.
To find out more about the benefits of Chapter 13, contact the Law Offices of John T. Orcutt. Read reviews from satisfied clients and then call 1-888-234-4181 to schedule a free Wilmington bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.