If you are struggling with overwhelming personal loan debt, Chapter 13 bankruptcy potentially offers a structured and manageable solution to your challenges. Chapter 13 allows you and your legal team to craft a manageable repayment plan to address your financial obligations over a three-to-five-year period.
If personal loans are a significant part of your debt, Chapter 13 may provide the relief and stability you need. Why? Personal loans are considered unsecured debts, meaning they are not backed by collateral like a house or car. In Chapter 13 bankruptcy, these debts can be included in your repayment plan, which will reorganize all your financial obligations based on your income, expenses and ability to pay.
How does the process work?
When you propose a repayment plan, your total disposable income (the amount left after covering necessary living expenses) will help to determine how much you’ll pay toward your debts each month over the life of the plan. Unsecured debts like personal loans are typically paid a portion of their total amount, with the remaining balance discharged at the end of the repayment period, meaning that you will no longer be legally obligated to pay it.
Once you file for Chapter 13 bankruptcy, an automatic stay goes into effect, stopping collection efforts, lawsuits, wage garnishments and harassing phone calls. This can give you the breathing room you need to focus on your repayment plan without creditor interference. While filing for bankruptcy will impact your credit, completing your repayment plan demonstrates responsibility, allowing you to rebuild your financial reputation.
Chapter 13 bankruptcy can be a complex process, know that an experienced legal team can help to ensure that your repayment plan is realistic, complies with court requirements and protects your interests. They can also negotiate with creditors to maximize the benefits of your filing.
