You probably didn't go through life expecting to file for bankruptcy. You've always been responsible with your money, you paid your bills on time, and you never bought something you couldn't afford. Then, life took an unexpected turn that forced you to go into debt. Now, you're faced with the possibility of filing for bankruptcy, and you're left wondering if there are any other options out there for you.
The truth is, bankruptcy has a negative stigma attached to it that really shouldn't be there. Although bankruptcy may seem like a bad thing, bankruptcy actually has many benefits and will give you the fresh financial start you need to move forward with your life. Specifically, there are many advantages to filing for Chapter 13 bankruptcy.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a reorganization bankruptcy that is designed for people with a steady income who can pay back a portion of their debts through a repayment plan. Repayment plans typically last anywhere between three to five years. If you make too much money to qualify for Chapter 7, there's a good chance that you'll qualify for Chapter 13. In Chapter 13, you get to keep all of your property, including nonexempt assets. In turn, you'll pay back a portion of your debts through your repayment plan.
The length of the Chapter 13 repayment plan is often discouraging for people, and Chapter 7 may seem preferable because the length of the bankruptcy is much sorter. However, Chapter 13 has many advantages, many of which are not available in Chapter 7. Here are some of the biggest advantages of Chapter 13 bankruptcy:
- Stop creditor harassment: The moment you file for bankruptcy, the automatic stay goes into effect. The automatic stay is a preliminary injunction that protects your money and property from creditors. The automatic stay also stops all creditors from harassing you and trying to collect debt from you.
- Save your home from foreclosure: If you're currently facing foreclosure, filing for Chapter 13 bankruptcy may be able to help. Filing for Chapter 13 stops foreclosure on your home, at least temporarily, while you work out the details of your debt consolidation and repayment plan. The one stipulation is that you'll need to earn enough income to make your current mortgage payment at the same time that you're paying off your past due debts. As long as you can afford to make both payments, Chapter 13 will help you avoid foreclosing on your home.
- Get a mortgage modification: Although the bankruptcy code does not allow for first mortgages to be modified in bankruptcy, second and third mortgages can be modified through a process known as lien stripping. If you can only afford to pay your first mortgage after filing for bankruptcy, you may be able to benefit from this. If the court approves your lien strip, your second mortgage will not need to be paid during the three to five years of your repayment plan. At the end of your bankruptcy, the mortgage liens will be stripped off your property and included in your discharge.
- One monthly payment: In Chapter 13 bankruptcy, you make one monthly payment to a bankruptcy trustee, and this one payment covers all of your debts. The amount you pay depends on the budget that you put together with your bankruptcy attorney. Then, you'll submit this budget for approval by the Bankruptcy Court. Contrary to popular belief, your Chapter 13 payment doesn't necessarily have to be large. The bankruptcy trustee isn't out to get you, and they want to make sure that your monthly payment is something you can actually afford. That's why putting together a budget with your attorney is such an important part of the process.
- Discharge some of your debts: In your repayment plan, you're only paying what you can actually afford. Therefore, you may not be able to pay back 100% of your debt over three to five years. In fact, most people only pay back a fraction of what is initially owed. The amount of debt that you don't pay back over the course of your repayment plan is handled the same way it would be in a Chapter 7 case, meaning your dischargeable debts are wiped out. This gives you a fresh start moving forward.
If you're thinking about filing for bankruptcy, the best thing you can do is to meet with an experienced bankruptcy attorney who will be on your side every step of the way! Contact the Dellutri Law Group today for a free, no-obligation consultation! Call us at (800) 391-4337. Plus, you can click here to request a free consultation online. Our team of dedicated attorneys and staff are here to help!
