The Advantages of Chapter 13 Bankruptcy

Filing for a Chapter 13 bankruptcy is a reorganization of your debt. It is a great option for someone who is continuing to work and bring in income and may have even a small amount of disposable income.

In Chapter 13, you will be required to make monthly payments to your creditors for a period of 3 to 5 years. Although 3 to 5 years is a lengthy period during which you must make these continuous payments, a Chapter 13 filing has several advantages that in the long term may be best for your financial health.

Reasonable payment plan: When you file for a Chapter 13 bankruptcy, you and your bankruptcy attorney will submit a monthly budget to the bankruptcy court. Based on this budget, the court will determine how much you can afford to pay each creditor on a monthly basis. Since the court is using your own budget as its guide, you will not be set up for failure by being required to make monthly payments you cannot afford.

Consolidated payments: A Chapter 13 filing allows you to not only make reasonable payments each month based only on what you can afford, but it also consolidates these payments. You will make one payment monthly to your bankruptcy trustee and he or she will distribute the funds to your creditors. You will not have to pay each credit individually each month.

Can help you avoid foreclosure: When you file for Chapter 13, the bankruptcy court will automatically order a stay on all collection activities against you. Your creditors may not longer contact you concerning your debts – this includes any foreclosure action filed against you. This stay will enable you time to come current on your mortgages payments or to negotiate new terms with your mortgage lender. Note though, this stay only applies to missed payments that are past due. You will still need to make payments going forward as they come due on your mortgage throughout the bankruptcy proceeding.

You are able to retain all your property: Most types of property are exempt from sale in order to satisfy creditors in Chapter 13. Generally, you are able to keep all your property when you file a Chapter 13 bankruptcy. This is great news for people who have a lot of equity in their home or own expensive cars and jewelry.

Co-signers are protected: A co-signor is a third party who agrees to be responsible to your lender for paying your debt if you are unable to pay. The Chapter 13 automatic stay applies to co-signers as well. Filing Chapter 13 will protect a co-signer from this repayment responsibility so long as your court ordered plan provides for payment in full to your lender.

Attorney Melanie Tavare has helped clients navigate the complex bankruptcy code. She is well versed in the nuances involved in filing for a Chapter 13 bankruptcy. Schedule a free consultation with her today in order to discuss the ways in which filing for Chapter 13 bankruptcy may benefit you.