What Can Chapter 13 Bankruptcy Do For You?

How Can Chpater 13 Bankruptcy Help You Handle Your Debts?

There are many advantages to filing Chapter 13 over Chapter 7 as discussed below. But, like any discussions of legal solutions, whether Chapter 13 is right for you depends on your situation and your goals and abilities. To learn more about the Chapter 13 process, click here. To learn more about the differences between Chapter 7 and Chapter 13, click here.

How Does Chapter 13 Work?

Chapter 13 is the "Reorganization Chapter" for individuals. This means that debtors are able to eliminate certain debts and keep certain debts with more flexibility than Chapter 7. In Chapter 7, if the debtor is behind in payments, there is not much that can be done. Chapter 7 will just eliminate the debt and the asset will go back to the lender, regardless of how the debtor feels about it. In contrast, Chapter 13 allows the debtor much more flexibility regarding past-due debts.

The Advantages of Chapter 13

A big advantage of Chapter 13 is that Chapter 13 debtors are given up to 60 months to make up past-due payments on loans secured by property that the debtor wants to keep. For example, if the debtor is 12 months behind on house payments, the debtor can force the lender to allow the debtor to pay the past-due amount over 60 months. Try getting a lender to agree to that outside of bankruptcy. Another big advantage of Chapter 13 is the ability to eliminate second mortgages on the underwater property. If the debtor's primary residence is worth less than the first mortgage, Chapter 13 allows the court to eliminate the second mortgage and make it like a credit card debt. The debtor gets to eliminate a substantial debt on the house forever.

Another advantage of chapter 13 relates to debts that are not dischargeable. Some debtors like to use Chapter 13 to pay off taxes and court-ordered obligations without incurring any further penalties. Generally, taxing authorities and courts do not grant 60 months to pay off these obligations. For example, even with a tax debt that is not dischargeable, the debtor can have up to 60 months to pay off the tax without incurring any penalties from the taxing authority and without permission from the taxing authority.

If You Have More Questions

Please contact us if you have more questions or are ready to move forward and start the process of becoming debt-free. Remember, we are here to help you resolve your debt problems, so call us now!

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