Declaring bankruptcy is not a get-out-of-debt-free card. You will still have to pay for all or a portion of your debt. When you file for personal bankruptcy Chapter 7 or 13, you ask the government to help you create a payment plan with your creditors.
What happens after will depend on the bankruptcy chapter you filed. Both chapters require you to make efforts to repay the debt. One will require a lump sum, while the other is a payment plan you must follow for years.
With a Bankruptcy Chapter 7 filing, the court will determine which of your assets you must sell. Liquidation is the process of selling your assets to get cash. The profits of these sales will go directly to your creditors.
In addition to cash and funds from accounts, items the court may require you to sell include:
· Recreational vehicles with equity (meaning they have value if sold).
· Investments into stocks and bonds.
· Additional properties, such as a vacation home or second car.
With a Bankruptcy Chapter 13 filing, the government will establish a payment plan. You will not need to sell your assets unless you want.
Plans for debt between $10,000 and $25,000 can take 5 to 6 years to pay off. Chapter 13 bankruptcy is also referred to as a wage earner’s plan. To be eligible for Chapter 13, your unsecured debts must be lower than $419,275.
There are IRS tax relief programs available to help you settle tax debt or create a payment plan.