Bankruptcy provides a way for individuals in North Carolina who are overwhelmed with debt to get a financial fresh start. Chapter 13 is one of several bankruptcy options that protect debtors from collection actions while they work to pay down the debt they owe.
Chapter 13 is different from Chapter 7 bankruptcy in that there is no liquidation of the debtor’s assets. Debtors are allowed to keep possession of their property while paying on a court-approved repayment plan that lasts from three to five years.
It is not uncommon for courts to deny a Chapter 13 filing for debtors with irregular or inadequate income. Denial is also possible if the debt burden is too large.
The court will appoint a trustee to administer the repayment plan. Each month, the person filing Chapter 13 pays the agreed-upon amount of money to the trustee. The trustee then becomes responsible for allocating the money where it is needed to pay down the debt.
Priority consideration is given to debts like child support once the repayment process begins. Payment is also necessary for secured debts like loans for cars and houses. Money is paid toward unsecured debts like credit cards after the person filing Chapter 13 has taken care of their basic needs for the month.
Filers that complete their court-approved repayment plan become eligible to have the remaining debt they owe discharged. A discharged debt is stricken from the record, and no further payment is necessary. One stipulation is that all debts for alimony and child support must be clear before a discharge of debt can take place. A U.S. Trustee Program-approved debt counseling course is also required.
Not all debts are eligible for discharge under Chapter 13 bankruptcy. Debts not available to be discharged include mortgage loans, many types of student loans, certain tax obligations and others. Even with these restrictions, a Chapter 13 bankruptcy allows for more debt discharge than is possible with Chapter 7.
Many individuals facing the stress of serious debt continue to do so for months or years without knowing the help available to them. Individuals struggling with debt may find the relief they need by reaching out to an attorney.