Owing to a couple of financial setbacks, it is no longer possible to keep up with payments on outstanding debts. With creditors beginning to call and showing no signs of wanting to work out some alternative payment arrangements, the time has come to talk with a Chapter 13 bankruptcy lawyer in Wichita. How Does a Chapter 13 Work? Unlike a Chapter 7 bankruptcy, none of the debt is dismissed. Instead, the court takes on the task of collecting funds from the debtor and distributing them to all creditors. The distribution is managed with the use of a plan approved by the court.
Once all the debts are paid in full, the bankruptcy is considered settled, and the court releases any claim on the income of the debtor. How Is this Different From Other Approaches? With debt settlements and similar arrangements, the existing debt is still subject to interest and penalties. As the Chapter 13 bankruptcy lawyer in Wichita will explain, the court freezes those outstanding balances and does not allow for additional interest to be applied. Thanks to this provision, the debt will be paid off in a shorter period of time.
What About Basic Living Needs? Another reason to consider a Chapter 13 is that the plan drafted by the court will allow the debtor to retain enough income to take care of basics like rent, utilities, food, and other essentials. The payments to the court are withheld by the employer and forwarded each pay period. Employers then release the balance of the net income to the debtor, who can use the money any way he or she desires. The Effect on Credit RatingsAs the lawyer will point out, anyone who is seeking bankruptcy protection has already sustained some damage to his or her credit rating.
Entering into this type of bankruptcy arrangement will make it more difficult to obtain more credit until some time after the current debts are paid in full. That is not necessarily a bad thing, since the goal is to get out of debt, not create additional obligations. For anyone who thinks that filing for bankruptcy is the only answer, talk with the team at Business Name. After a consultation, it will be much easier to determine if filing for a Chapter 13 bankruptcy is in the best interests of the client. You can also visit their Google+ page for more information.