Why File Chapter 13

29 Jan Why File Chapter 13

cuddling coupleHow do I love thee, Chapter 13?

Let me count the ways.

I love Chapter 13 because:

  1. Debtors keep possession and control of their assets. There is no trustee tasked to sell assets.
  2. Repayment to creditors can be little or even nothing, depending on the debtor’s income and the value of their assets.
  3. Chapter 13 plans are flexible. If income falls or is temporarily interrupted, the plan can be changed to accommodate the change.
  4. The case can be freely dismissed if it is no longer needed.
  5. The automatic stay prevents foreclosure or collection action for the entire length of the plan.
  6. Mortgage defaults can be cured with payments over the course of the plan.
  7. The interest rate on car loans can be reduced to today’s market rate.
  8. Mortgage liens that are underwater can be eliminated in 13.
  9. Judgment liens can be avoided if they compromise an exemption the debt is entitled to.
  10. The means test for Chapter 13 excludes more kinds of income and deducts more expenses than Chapter 7.
  11. Tax penalties, even on recent taxes are dischargeable.
  12. Debts to former spouses, other than support debts, can be discharged.
  13. Tax liens that exceed the value of the debtor’s assets at filing are eliminated.

And there’s more

When you file Chapter 13, you are eligible to file another Chapter 13 case, if you need to, far more quickly than if you had filed a Chapter 7.

In fact, you are eligible to file a second Chapter 13 after two years from the filing of your first case.

Your bankruptcy filing generally drops off your credit report three years earlier than if you had filed a Chapter 7 bankruptcy.

Unlike debt settlement arrangements, your repayment plan is enforced by a federal judge. All creditors are required to go along. No one can opt out of the plan and sue you without the judge’s express permission.

Chapter 13 can be a powerful and affordable tool for getting back on your financial feet.

I love it!

Image courtesy of Flickr and MightyBoyBrian.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

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