If you are struggling to stay current on your debts, you should consider filing for Chapter 13 bankruptcy. A Chapter 13 proceeding allows you to retain the property, such as a North Carolina home, car, or other personal items, while your case is pending. Priority and secured creditors are repaid over three or five years, and payments to unsecured creditors may also be included in your repayment plan.
What is a priority debt?
A priority debt must be repaid in full even though you have sought protection from creditors. Examples of priority debts include back taxes owed, child support payments, and spousal support payments. If there is an outstanding balance owed after three or five years, you must continue to make payments until it is satisfied.
What’s the difference between a secured and unsecured debt?
A secured debt is backed by collateral. For example, a home loan is generally secured by the home purchased with funds provided by a lender. Unsecured debt is secured only by a borrower’s promise to adhere to the terms set forth by the lender.
What happens if there is a balance remaining on nonpriority debts?
If a balance remains on unsecured debt after a Chapter 13 repayment plan comes to an end, that debt will likely be discharged. However, if there is a balance remaining on an unsecured debt, you will need to make arrangements to settle it as quickly as possible. Otherwise, a creditor may be able to foreclose on your home or repossess your vehicle.
Filing for bankruptcy may provide you with the leverage needed to renegotiate loan terms or the time needed to sell an asset before it can be repossessed. In most cases, creditors cannot engage in debt collection activities while a Chapter 13 proceeding is ongoing.