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How Chapter 13 bankruptcy works

When hearing about a bankruptcy, most people in North Carolina may automatically think about a program via which they may lose precious assets in exchange for being released from debt responsibilities. This is essentially what can happen in a Chapter 7 bankruptcy and is the reason that even the U.S. Courts call this type of bankruptcy a liquidation plan. However, there may well be an alternate type of plan for consumers who need relief from excessive debt but also want to keep their homes or other assets. 

A Chapter 13 plan is often referred to as an individual debt adjustment or even a wage earner's plan. In essence, this form of bankruptcy is a type of organized debt repayment and consolidation program. It allows consumers the ability to restructure their debts and make payments over time while avoiding foreclosure or other loss of assets.

As explained by Experian, a consumer in a Chapter 13 bankruptcy will make payments to a trustee every month for the life of a plan. A single plan can last anywhere from 36 to 60 months. In order to qualify for a Chapter 13 plan, a consumer must meet certain income requirements which is why it is sometimes referred to as the wage earner's plan. 

The trustee distributes funds to debtors per an agreed-upon plan. The amount repaid may be less than the original amount owed but allows them to recoup some of the debt owed. For consumers, it allows time to make up past due amounts and get back on a better path forward. 

 

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Sigmon & Henderson, PLLC
518 S New Hope Road
Gastonia, NC 28054

Phone: 704-269-6374
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