Chapter 13 Bankruptcy
In some cases, a person may not want to file a Chapter 7 bankruptcy, or may not qualify for relief under Chapter 7. In those cases, a Chapter 13 bankruptcy provides a sound alternative. A Chapter 13 bankruptcy is a reorganization-type of bankruptcy. In this type of case, you design a plan in which to repay your debts over a 3 to 5 year period. Also known as a Wage Earner’s Plan, a Chapter 13 bankruptcy enables individuals with regular incomes to develop a plan to repay their debts. During the period in which you are repaying your debts, the Federal Bankruptcy Law prohibits creditors from starting or continuing collection efforts against you. Thus, a Chapter 13 bankruptcy gives you 3 to 5 years of breathing room in which to catch up on your bills and restore your credit.
Like a Chapter 7 bankruptcy, Chapter 13 bankruptcies can also immediately stop garnishments, foreclosures, or repossessions of your property. However, unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy can help homeowners catch back up on their past due mortgage payments. It is possible in a Chapter 13 bankruptcy to keep your home no matter how much equity you have in it. Further, under a Chapter 13 bankruptcy, you can bring your mortgage payments current over the 3 to 5 years you are in the plan.
Through a Chapter 13 bankruptcy, almost all of your bills would be lumped into one single, low monthly payment. At the conclusion of completing all your plan payments, any remaining debt would be discharged. This means you would no longer be responsible for that debt.
A major advantage of Chapter 13 bankruptcy is that in most cases you will pay significantly less to your creditors than you currently owe. For example, in a Chapter 13 bankruptcy, it is possible to have your second mortgage forgiven altogether. It is also possible to reduce the principal amount you owe to a creditor on your car or other property. With regards to credit cards, it is possible you may only have to repay a small percentage, if any, towards your outstanding debt. Regardless of how much you pay however, at the end of the 3 to 5 year plan, you will receive a discharge from that debt.
While more complex than a Chapter 7 bankruptcy, Chapter 13 bankruptcy offers a number of benefits over a Chapter 7. Primarily, the ability to maintain your home while consolidating your debt into a single monthly payment.
Our firm is more than happy to discuss with you the benefits of a Chapter 13 bankruptcy and help you decide which bankruptcy, either Chapter 7 or 13, would be most helpful in your situation. To discuss your options regarding a Chapter 7 or 13 bankruptcy, please contact our office today.