Why Should You File a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is often preferable to a Chapter 7 bankruptcy because it helps you keep your property if you are behind on your mortgage or business payments. It is a repayment plan that allows you to make payments toward your debts at a significantly reduced cost. You can pay the debts off at a reduced interest rate over a period set by the court. Chapter 13 can be enabled to prevent a house foreclosure, make up for missed car or mortgage payments, pay back taxes, and stop interest from accruing on your tax debt.

Through a Chapter 13 bankruptcy, you may be able to keep your valuable non-exempt possessions. Our attorneys can negotiate a reasonable repayment plan based on your disposable income so that you can make feasible monthly payments without worrying about necessities. By sticking to the terms of the repayment plan, all your remaining dischargeable debt will be forgiven when the period ends. This means that you will no longer be legally liable to pay back your old debts.

Chapter 13 is generally filed by debtors who wish to keep secured assets, such as a home or car, or who make too much to qualify for a Chapter 7 bankruptcy. To file for Chapter 13, you must have a source of disposable income to apply toward the repayment plan. Chapter 13 reorganizes debt while Chapter 7 is a full liquidation.

Secured vs. Unsecured Debts

Secured debts are those tied to a tangible item, such as a car or home. Lenders take on less risk because if you fail to pay them back, you could lose the asset that is up for collateral. A typical example of a secured debt is a mortgage, where a lender places a lien on the property until the loan is fully repaid. When you default on the loan, the bank can seize this property and sell it to recover the losses. A Chapter 13 bankruptcy initiates an automatic stay which prevents this from happening.

Unsecured debts such as credit cards do not provide lenders any security. When a borrower fails to repay the loan, the creditor can sue the debtor to collect the amount owed. These types of loans typically charge a high-interest rate and are available to those with decent credit. Credit cards and medical bills are both examples of unsecured debts. With a Chapter 13 bankruptcy, you can stop all collection calls regarding your unsecured and secured debts. 

Key Differences Between Chapter 13 and Chapter 7 Bankruptcies

There are several differences between a Chapter 13 and Chapter 7 bankruptcy. One of the key differences is that, under a Chapter 13 filing, your debts are reduced rather than canceled. You may also file for Chapter 13 immediately after repaying your debts. In a Chapter 7 filing, you can only file every 8 years. Another significant difference is that co-signers are immune from creditors if your Chapter 13 plan includes full payment of the co-signed debt. Chapter 7 would require them to file for bankruptcy protection, or they must pay the debt. 

Speak With an Experienced Chapter 13 Bankruptcy Lawyer

At E. Orum Young, our firm sees to it that creditor harassment stops immediately when you file your bankruptcy with us. We are proud members of the National Association of Consumer Bankruptcy Attorneys and have served clients throughout Northeast Louisiana for over 35 years. With over 20,000 bankruptcy filings, we have processed more of these types of cases than any other law firm in our area.   Call us today at (318) 450-3192 for your free case evaluation and find a path to financial freedom.