Chapter 13 bankruptcy allows a New York consumer to reorganize his debts into payments that he can responsibly manage. The payments that a person makes toward his outstanding sums in Chapter 13 bankruptcy are only made out of his disposable income, which means that unlike under Chapter 7 bankruptcy he does not have to turn his property over to a bankruptcy trustee for liquidation in order to have money for the repayment of his creditors. Chapter 13 bankruptcy can, however, last for a period of years before it is resolved.
Both secured and unsecured debt can be managed in Chapter 13 bankruptcy. Credit card debt is an unsecured debt. It creates an unsecured claim for a creditor because it is not tied to property as collateral. Whereas a home or car can be repossessed if a loan falls into default, credit card debt carries with it no such security interest. Unsecured debts like credit card debt and medical debt generally have to be repaid, at least in part, during Chapter 13 bankruptcy proceedings.
One way that Chapter 13 bankruptcy can help a person with credit card debt is that under it the consumer does not have to give up his car, home and other property to be given a chance to repay his loans and creditors. He can continue to live his life while working toward the satisfaction of his debt.
Additionally, under Chapter 13 bankruptcy, credit card companies are generally blocked from seeking collection on the entire outstanding sum of the consumer's card balance. If under the bankruptcy proceeding the creditors agree to accepting a reduced sum in satisfaction of the debts, they cannot later pursue more money on the same debts from the relevant party.
Filing for bankruptcy is a process with definite advantages and disadvantages, and the decision to do so should be made carefully. Legal professionals who practice bankruptcy law can provide useful guidance for those who wish to weigh the pros and cons of particular bankruptcy options. Chapter 13 bankruptcy can be a good choice for individuals with high credit card debt as well as other types of outstanding loans.