If you’ve ever wondered, “Why file Chapter 13 bankruptcy?” This post might help. Before we can answer that question, however, we will need to learn more about what Chapter 13 Bankruptcy is and what it entails.
Chapter 13 is one of the most common forms of bankruptcy.
“It is also known as a “wage earner’s bankruptcy”. It helps those with a consistent income to create a plan to repay all or portions of their debts. In this chapter, the debtor and their attorney propose a repayment plan to their creditors that can be fulfilled in an average of 3 years. If the debtor’s income happens to be less than the state’s median, the court can make an exception and extend that time frame. However, even with the extension, a payment plan under Chapter 13 bankruptcy will last longer than 5 years.”Bankruptcy Basics
Many of our clients feel comforted to know that during this period, the law doesn’t allow creditors to continue with their collecting efforts.
So what the benefits are for filing bankruptcy under Chapter 13?
Chapter 13 Bankruptcy can:
- Prevent the foreclosure of an individual’s personal residence and it could even erase delinquent mortgage payments that are due during their payment period,
- Can “restructure debts”, extend and also distribute debt payments more evenly across the term of the bankruptcy plan,
- May also lower your monthly debt payments,
- Can act as a consolidation loan, where you can just make your debt payments to the trustee who will then distribute the money to your creditors,
- Allows you to have no direct contact with your creditors for the duration of the Chapter 13 plan,
- Finally it allows a repayment of debt based upon terms you can afford.
Chapter 13 Bankruptcy however is not for everyone. Your bankruptcy attorney should take the time to look at your situation and see what is best for you based on your goals. It’s equally important to note that if you filed a Chapter 7 bankruptcy in the couple of years you may be able to file Chapter 13 Bankruptcy right away.
If you would like to know more about Chapter 13 bankruptcy and if you qualify to file CONTACT US HERE to set up your consultation today!