Many people think that bankruptcy is just a thing you can do to get rid of you debt. Well that is true but it’s a bit more nuanced than that, if fact it can get down-right complicated and complex. So the first thing you need to understand is that there are several different kinds of bankruptcy. Here in Utah there are actually six different kinds: there is a kind of bankruptcy for cities and towns; there is one for farmers and commercial fisherman, several kinds for companies and several kinds for individuals. Let’s focus on bankruptcy where an individual or couple can pay back their debts over time. This kind of bankruptcy is what we call Chapter 13 bankruptcy.
As I indicated the bankruptcy were you pay back your debts is called Chapter 13 Bankruptcy as opposed to more common Chapter 7 Bankruptcy where you liquidate your assets and eliminate your debts. In Chapter 13 bankruptcy the party filing it (the Debtor) is required to present to the court and their creditors a re-organization plan within 14 days of filing the case. A Trustee is then appointed to oversee the process. There is a process in place whereby creditors of the debtor can object to the proposed re-organization plan and hearings are held to determine if the plan will be succeed.
Once the debtor has satisfied the requirements and responded to the objections raised by the creditors the Judge assigned to the case will review the plan and if acceptable will sign off on the plan. Chapter 13 plans are required to last from 36 months to 60 months with monthly payments made to the court assigned Chapter 13 Trustee. This trustee will take the funds paid by the debtor and distribute them to the debtor’s creditors. Some Chapter 13 plan return 100% to creditors but the majority do not and pay as little as 0% to unsecured creditors.
Chapter 13 bankruptcy where you pay back your debts has a number of benefits including: a lower level of risk to the debtor loosing assets (i.e. home, cars, etc.), ability to catch up missed mortgage and car payments, lower risk level of litigation from creditors, as well as means to pay back creditors in a fair and equitable manner.
Should you consider the bankruptcy where you pay back? That’s a question that you will need to discuss with an experienced bankruptcy lawyer. I would suggest you work with a bankruptcy attorney to figure out your best course of action but make sure you choose your attorney wisely. You should understand that bankruptcy attorneys make more money on a Chapter 13 case since you will be their client for 3-5 years and Chapter 13 cases are time consuming and complex. So sure you choose one that is not just looking to just make a bunch of money from you but is looking out for your best interest. If Utah call the Utah Bankruptcy Guy and let us show you what a Utah Chapter 13 bankruptcy would look like given your unique situation.