Why Should You File a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is often preferable to a Chapter 7 bankruptcy. A Chapter 13 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 greatly reduced cost. You can pay the debts off at a reduced interest rate over a period of time 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 often 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 a Chapter 7 is a full liquidation.

Secured vs. Unsecured Debts

Secured debts are those that are 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 common 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.