A bankruptcy filing is a federal way out for people who are struggling with finances due to unforeseen circumstances. Individuals who are going through a tough financial phase can opt for filing bankruptcy under either Chapter 7 or Chapter 13. While many debts are discharged in Chapter 7, there are a number of benefits associated with Chapter 13 bankruptcy too. The latter has a court-approved repayment plan through which the bankruptcy filers are allowed to make payments to the debtors over a period of 3-5 years. The repayment plan is devised keeping in mind the debt owed to the creditors and the income of the filer. In this way, the debtors make one manageable payment every month to the bankruptcy trustee which ensures that the payment reaches the creditors. Thus there is no direct contact with creditors.
According to Los Angeles based law firm Recovery Law Group , those individuals who are able to qualify for this Chapter, there are a number of advantage, such as:
- In case you have fallen behind on monthly mortgage payments, Chapter 13 bankruptcy allows you to avoid foreclosure.
- Non-exempt property which cannot be protected under Chapter 7 bankruptcy can be protected if you file under Chapter 13.
- With the repayment plan, you can catch up on car loan payments and prevent repossession of the vehicle. The car payments are reduced depending on how much the original principal amount of loan remains and the current value of the vehicle.
- In case you had previously (within 8 years) filed for a Chapter 7 bankruptcy, you can get protection with filing a Chapter 13 now.
- In case you owe taxes which cannot be discharged, they can be repaid through the Chapter 13 bankruptcy repayment plan. This way the IRS (Internal Revenue Service) cannot make collection attempts and will have to accept whatever payment amount has been agreed to upon by the bankruptcy court.
- A repayment plan can be devised for student loan debt under Chapter 13, which typically does not get discharged during bankruptcy.
- Co-signers are often at the receiving end of the creditors when you file for bankruptcy under Chapter 7. But Chapter 13 protects them.
In case you find yourself in a financial mess, with repayment problems spiraling out of hand and creditors giving you a hard time, you should consult bankruptcy lawyers to discover your options. Find out which chapter of bankruptcy can you qualify for and which will be the best suited for your particular conditions.