Chapter 13 Bankruptcy
A Chapter 13 Bankruptcy allows you to restructure your debts so that you can begin rebuilding your credit and regaining financial solvency.
If you are in foreclosure or behind on your mortgage or car payments and need time to catch up on the payments, you may wish to consider filing a Chapter 13 bankruptcy case as we can oftentimes STOP a Foreclosure!
Chapter 13 bankruptcy is designed to allow consumer debtors to repay only the amount of unsecured debt that they can reasonably afford to repay over a three to five year term. A Chapter 13 bankruptcy case may be appropriate if you do not qualify for Chapter 7 bankruptcy, or if you owe arrearages on a mortgage and would like to keep your home, or if you have a small business and need to restructure your business debt. Chapter 13 bankruptcy is not available to corporations or other business entities.
One important advantage of a Chapter 13 bankruptcy is that in some circumstances it is possible to “strip” a second mortgage or home equity line of credit if the value of your house has declined so that your home is worth less than you owe on your first mortgage. When a second lien is “stripped,” the lien is included as unsecured debt in your Chapter 13 case, so that if you make it through a three to five year repayment plan, the balance of your unsecured debt (including the “stripped” amount) is discharged.
Who is a Good Candidate for Chapter 13 Bankruptcy?
Generally speaking, Chapter 13 works best for people who:
- People who are behind on payments on secured property – (autos, boats, homes) that they want to keep. Many people file Chapter 13 bankruptcy petitions specifically to stop car repossession or home foreclosure. Chapter 13 Bankruptcy can be helpful for getting caught up on secured debts while keeping the property that secures the debt.
- People who have tax debts that cannot be discharged in a Chapter 7 – Some tax debts are non-dischargeable but some are able to be included in a Chapter 13 repayment plan and paid over time.
- People who have non-exempt property that they want to keep – In a Chapter 7 bankruptcy case, non-exempt property is typically sold-off to repay creditors. Using a Chapter 13 repayment plan, the debtor maintains their property while making scheduled payments.
- People who have filed for Chapter 7 bankruptcy in the prior 8 years – are not eligible to file Chapter 7, but can take advantage of a Chapter 13 repayment plan.
- People who want to cause no harm to their co-signers – in a Chapter 7 bankruptcy, a co-signer will remain liable for a debt even if that debt has been discharged for the bankruptcy petitioner. To not harm your friend or family co-signer, you can include it in a Chapter 13 repayment plan and your the co-signer will be protected so long as you remain current with the repayment plan.
- People who are saddled with past-due student loan debt – Unfortunately, student loans are generally not dischargeable in a Chapter 7 bankruptcy. There are more approved instances where student loan debt can be included in a Chapter 13 repayment plan.
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