Recently, Chapter 13 bankruptcy has become a popular form of bankruptcy filing. The reason behind this is a large number of Americans were losing their homes to foreclosure and Chapter 13 bankruptcy seemed to fill the void when loan modifications didn’t work. Anything to stop foreclosure was in order for many individuals to buy them time. When filing Chapter 13 bankruptcy, the debtor and their bankruptcy attorney will need to come up with and submit a feasible repayment plan that will last 3 to 5 years. In this economy, nothing is written in stone and 3 to 5 years can be a long time for financial changes in one’s life.
As the job market continues to be weak, many individuals have trouble keeping up with the payments of their payment plan. That’s why Congress made Chapter 13 bankruptcy a very flexible Chapter allowing an individual to change their plan when their life changes. All they need to do is have their bankruptcy attorney submit the changes to the bankruptcy trustee for approval. The changes can be temporary or even permanent. The flexibility is there to allow everyone a chance to be successful in completing their bankruptcy filing.
When things go south for an individual that is currently filing Chapter 13 bankruptcy, they have the option to convert it to a Chapter 7 bankruptcy. The bankruptcy court understands that many times financial matters can get worse during the payment plan. Especially now in today’s economy when we are seeing unemployment of higher than 8%. The flexibility of the Chapter 13 allows an individual that has lost their job to convert it to a Chapter 7 bankruptcy when it is apparent that they will no longer be able to keep up the Chapter 13 plan. The bankruptcy attorney will need to submit a new bankruptcy petition and the individual filing will need to attend another 341 meeting or meeting of creditors.
Basically, the Chapter 13 will be stopped and a new bankruptcy will be filed. In extreme circumstances this allows an individual to keep the automatic stay alive while they are trying to get their finances back together. That means that creditors will be told to keep their hands-off on the debtor filing Chapter 7. The good news is, for someone that is faced with the conversion, a Chapter 7 bankruptcy only takes about 4 to 6 months to complete it. It will quickly put an end to the financial pain of the past. In many situations, this flexibility makes Chapter 13 a better choice than debt settlement or just trying to file Chapter 7 in the first place.