Individual bankruptcy filings usually are classified as either Chapter 7 or Chapter 13. Chapter 7 discharges most of the outstanding debt, whereas Chapter 13 involves a repayment plan lasting up to five years. A bankruptcy attorney in Belvidere, IL, can explain how these programs work and provide advice about which is best for a client’s particular situation.
Important Considerations
Many men and women want to file Chapter 13 even though they likely would have trouble handling the payment schedule. These individuals are determined to pay off their debt.
However, it’s crucial to take a hard, realistic look at the financial situation. A bankruptcy attorney in Belvidere, IL, can help with this. The plan may look possible on paper, but people tend to be too optimistic about their future financial circumstances. When the repayment plan allows very little wiggle room, one emergency expense could lead to default if the person cannot make an installment payment.
The Risk
If even one payment is missed, the trustee overseeing the plan could file a motion to end the program. If this happens, any organizations to which the person owes money can legally begin collections activity again.
The Default Rate
The federal government requires people who file for bankruptcy to complete credit counseling and a money management course. Even after this, though, not all individuals have mastered the skills to maintain financial stability. The default rate for Chapter 13 is high, at nearly 70%.
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