What Are the Benefits of Chapter 13?
If you are facing overwhelming debts, Chapter 13 bankruptcy can help you get your financial situation under control. But what are the benefits of Chapter 13?
In a Chapter 13, you may be able to repay your debts while retaining your property. You also don’t have to endure the never-ending cycle of debt payments, fees, and interest charges. You can start fresh after a few years of properly managed debt repayment. Call Allmand Law Firm, PLLC today to find out more about the benefits of Chapter 13.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, often called “reorganization bankruptcy,” allows you to organize your debt into a manageable payment plan that usually lasts three to five years. Although you will be repaying some of your debt, that which is not paid off may be eliminated in some circumstances at the end of the payment plan. You have many options for managing your debt in a Chapter 13 plan.
Benefits of Chapter 13 Bankruptcy vs. Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is quite different from Chapter 13. With Chapter 7, you may be required to liquidate, or sell, your assets and property to repay debts. However, Chapter 13 allows you to keep most of your property. Additional benefits of Chapter 13 over Chapter 7 include the following:
You Can Avoid Foreclosure With Chapter 13
One of the biggest benefits of Chapter 13 include the avoidance of foreclosure. When you file, an automatic stay will stop foreclosure proceedings immediately. Then, you may make up for missed payments on home mortgages. Those missed payments may be rolled into your total debt amount or you may renegotiate the terms. Chapter 7 does not allow you to make up for missed payments.
Your mortgage payment may be included in your debt payment plan, and you will have a longer period of time to make reasonable payments. Your payments will be based on your disposable income and monthly budget amount. With Chapter 7, you may lose your home if you’re unable to afford payments.
You Can Avoid Repossession of Your Property With Chapter 13
Chapter 7 bankruptcy expects you to sell much of your property to repay debts. However, Chapter 13 allows you to keep that property, including cars and more. Your payments will be rolled into a payment plan that lasts for three to five years, and you will have an opportunity to catch up on past due payments.
Chapter 13 Will Only Show on Your Credit Report for Seven Years
Another of the benefits of Chapter 13 vs. Chapter 7 is that Chapter 13 will be reported on your credit report for a shorter period of time. Chapter 13 is reported for seven years and Chapter 7 is reported for 10 years. This gives you three more years to rebuild credit without bankruptcy on your report if you use Chapter 13.
Your Income Won’t Disqualify You From Filing Chapter 13
While you must pass a Means Test to verify that you don’t make too much money to qualify for Chapter 7, one of the benefits of Chapter 13 is that you don’t have to make a certain amount of income. If you don’t qualify for Chapter 7, you will likely qualify for Chapter 13. Although there are limits on the amount of debt you can have to file Chapter 13, there are no limits on your income.
Other Benefits of Chapter 13
You don’t have to be embarrassed if you file for bankruptcy. Many people use Chapter 13 to reorganize and continue meeting payment obligations in a more manageable way. Some other benefits of Chapter 13 include the following:
You Can Reschedule Secured Debts
If you have secured debts that are connected to property, then you can extend payments over a longer period of time. This will allow you to lower payments and make them more manageable for you. You can include secured debts in your overall payment plan, and the bankruptcy trustee will allow you to propose a monthly payment amount based on your monthly budget. This will allow you to keep your property that is connected to secured debt, while paying for things in a way that benefits you.
You Can Reorganize Non-Dischargeable Debt Through Chapter 13
Many people seek Chapter 13 because they have debt that cannot be discharged. If you owe arrears on alimony or child support, or have past due taxes, you may not be able to discharge it. However, you can include these debts and others in a payment plan through Chapter 13 bankruptcy. You can pay these debts in full over three to five years and become debt free.
Chapter 13 Protects Your Co-Signers
One of the benefits of Chapter 13 is that you don’t push all of your debt onto your co-signers. You will be retaining responsibility for your debts, but simply reorganizing them. If you file Chapter 7 or discharge the debt from your responsibility, then the creditor may go after your co-signers. If you have signed on a loan with a friend, family member, or business partner, this can create strained relationships. By filing Chapter 13, you can avoid this situation and retain responsibility for the debt.
You Don’t Have Direct Contact With Your Creditors
If you are in debt and have gotten behind on payments, then you likely have dealt with creditor harassment. The phone calls and letters you receive can be embarrassing and stressful. One of the benefits of Chapter 13 is that you will no longer have to deal with this creditor contact. Your creditors will be paid according to the Chapter 13 payment plan, and your bankruptcy attorney or bankruptcy trustee will manage the payments and other contact with the creditors.
Learn More About the Benefits of Chapter 13
The benefits of Chapter 13 can help you become debt free and start your financial life again with a clean slate. If you have questions about Chapter 13 or how it can help you, contact Allmand Law Firm, PLLC today.