13 Dec Why File Chapter 13 Bankruptcy?
Why file a Chapter 13 bankruptcy? There are three main reasons to file Chapter 13 bankruptcy.
1) Chapter 13 is for people who have the means to repay their debts. This means that they have some money available to make payments. They make more that what is required to live on, but may not be able to pay their debts as fast as the creditors want, or maybe not in full. Chapter 13 may be able to reduce what is paid if you can’t afford to pay in full, or it might just give you more time to pay the debt.
2) Chapter 13 is for people who are behind on secured debts or need to reorganize the repayment terms. Secured debts are payments on things that have collateral, like houses, cars and personal property loans.
You might even be able to reduce what is owed on a secured debt if the value of the property is less than what is owed. That will depend on how long you have owned property, and whether or not it is a your residence.
Bankruptcy doesn’t allow you to reduce the balance on a mortgage secured by a person’s home but it can be reorganized by catching up the missed mortgage payments. The missed payments (mortgage arrears) can be caught up over a 3-5 year time period.
Chapter 13 bankruptcy can give you up to five years to catch up missed mortgage payments, and at the same time it can stretch out the time to pay off a car and other non-residential property debts, reduce what is paid to unsecured creditors like credit cards, loans or medical bills, and overall balance your budget.
3) Chapter 13 bankruptcy is for people who want to keep their property but might loose it if they are sued or they file Chapter 7. If they have non-exempt property that would be taken from them if they filed for Chapter 7, and they want to keep it. So long as the payments into the Court cover at least the value of the non-exempt property, the debtor can keep the property.
Chapter 13 is a great program for people who need it, can afford it, and have property that will be protected by the program. Speak to your attorney to make the decision about whether or not Chapter 13 or Chapter 7 bankruptcy is a good option for you.
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