Chapter 13 bankruptcy is designed for people or small businesses with too much debt but have a steady income. Rather than selling off assets to pay debts, you are allowed to continue to operate as usual. However, your debts are reorganized so that some can be discharged, and you can pay the rest. Understanding debt reorganization in Chapter 13 bankruptcy is the key to coming out of it with your assets or business intact.
What is Debt Reorganization?
Understanding debt reorganization is one of the most important parts of being a lawyer in a Chapter 13 bankruptcy. Debt restructuring is the process of identifying, classifying, and discharging unsecured debts. Once that happens, the debts that are left are the more important ones, like the car and your house.
Why Debt Reorganization is Important in Chapter 13
Debt reorganization is an important part of Chapter 13 bankruptcy because it makes it possible to create a debt repayment system that you can afford. The entire goal of Chapter 13 bankruptcy is to give you a chance to pay back and get out of debt without losing your income or business.
Why Choose a Chapter 13 Debt Reorganization
Chapter 13 is the best option for anyone with a business or job that provides stable income. In Chapter 13 bankruptcy, you create a debt repayment plan that gets rid of your debt using your income rather than selling off your assets. Many people come out of bankruptcy with a business that can thrive or a job that easily lets them pay their bills.
Chapter 13 works because your debt is reorganized and prioritized. That way, you are focusing on the important debts, like your mortgage or car payment, so that you don’t lose assets.
Restrictions While on a Chapter 13 Plan
If you do qualify and get approved to start a Chapter 13 plan, there are several restrictions on what you can do. One thing that you have to remember is that you cannot acquire new debt. The court monitors your credit to make sure you are making progress. Your credit will essentially be frozen, so you may not be able to take on new debt.
Another restriction is that you have to make payments on time. Since much of your debt is going to be discharged to help you get back on your feet, you are required to be on time and meet the requirements of the payment plan. Missing payments can result in the plan being canceled and you having to file for a different type of bankruptcy.
Work With a Bankruptcy Lawyer
Coordinating a Chapter 13 bankruptcy can be a difficult task on your own, especially when it comes to putting together a function repayment plan. Debt reorganization is essential to the process, but you need to know what you are doing to avoid many of the problems that can come up. Your best course of action is to work with a Chapter 13 bankruptcy lawyer to manage the process. Contact Kain + Henehan by calling (612) 438-8006 or filling out the online form to discuss your case during a free consultation.
