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Chapter 13 Bankruptcy

When DC residents consider filing for bankruptcy, they have a few different options. For some, Chapter 13 bankruptcy may be the best option. This type of bankruptcy allows people to deal with large amounts of debt in a structured, organized way. This may provide people struggling with debt a way out of their tough circumstances.

Chapter 13 bankruptcy allows its users to discharge their debt while keeping all of their property. This means that the bankruptcy court will grant the person filing for bankruptcy a three to five-year period to make structured debt repayments. When the debts have been repaid, the court will issue a discharge of debt that formally declares to creditors and collectors that the debts no longer exist. In addition, the court will order that certain types of property are ineligible for repossession during the payment period.

In order to be declared eligible for Chapter 13 bankruptcy, a person must meet certain requirements. For example, people that are self-employed or people who run one-person businesses can be declared eligible. The person must also be able to demonstrate that they have a regular income so the courts will know that the repayment schedule can be met.

The bankruptcy court may order a person filing for Chapter 13 bankruptcy to attend consumer credit counseling before proceeding with the bankruptcy. Consumer credit counseling companies offer debt management advice and debt repayment strategies. These courses may cost a small fee but those who are unable to pay may be eligible for a discount or free classes.

Chapter 13 bankruptcy may provide people with a plan to get out of debt. An attorney may be able to guide a client through the filing process and offer information and advice along the way.

Source: IRS, "Chapter 13 Bankruptcy – Voluntary Reorganization of Debt for Individuals", December 21, 2014

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