Should I file a Chapter 13 bankruptcy?
While Chapter 7 discharges your debts, Chapter 13 offers an ability to reorganize and repay your debts over a longer period.
Chapter 13 bankruptcies are a 3 to 5-year plan with your creditors and a court-appointed bankruptcy trustee. You must make monthly payments to the trustee and the trustee then distributes the money to your creditors. At the end of the plan, you may still end up being able to discharge some debts, but it’s a different path for those that qualify.
Chapter 13 benefits
- Since debts are not immediately discharged, you are usually allowed to keep your non-exempt assets, such as equity in your home. Chapter 13 can save your home from foreclosure.
- Non-dischargeable debts (student loans, alimony, and child support) can be arranged into more reasonable payment terms.
- Creates an automatic stay that stops most collection actions so that wage garnishments can’t occur
- Stops collection calls and delays lawsuits from being filed.
- The automatic stay protects you from losing your home in foreclosure, so long as you pay your mortgage.
- Certain debts can only be discharged in a chapter 13 bankruptcy (certain property damage, non-dischargeable taxes, security law violations, debts related to the division of property in a divorce, etc)
- Creditors are unable to seek payments on co-signed loans while one of the parties is protected as a Chapter 13 bankruptcy participant.
- A bankruptcy trustee moves the process along for you.
Chapter 13 negatives
- The filing process can take 95 days or longer from when the petition is filed to get the repayment plan approved by the court.
- The bankruptcy lasts for between 3 and 5 years.
- Many Chapter 13’s turn into Chapter 7’s as time goes on.
- Legal fees for Chapter 13 are higher
- The bankruptcy will not actually be discharged until after the repayment plan has been completed.
- Impacts your credit score
Chapter 13 works for those who can afford to pay some, but not all their debts. Chapter 13 helps you achieve more reasonable payment terms and affordable payments for credit cards and medical bills.
Working with an attorney allows us to communicate with your creditors and work with you to determine what debts you should be paying. If you are interested in seeing if you qualify to file for bankruptcy, you should get in contact with an experienced bankruptcy attorney at RICK STOCK LAW.
We can help you avoid common mistakes made by many as they look to achieve financial freedom.