Solutions // Chapter 13 Bankruptcy
An alternative for debtors who do not qualify for chapter 7 or those who need to protect non-exempt property.
Are you employed but working paycheck to paycheck? Have you fallen behind on mortgage payments or let other bills slide? You’re not alone. A recent study shows that 60 percent of American households cannot absorb an unexpected $500 expense. If you can’t make ends meet and your debts just keep growing, you’re probably harassed by bill collectors. You may even be in danger of losing your home to foreclosure or your car to repossession.
Chapter 13 bankruptcy provides a way for debtors with regular income and/or non-exempt personal property to eliminate burdensome debt through a fixed term repayment plan. For many debtors the plan payment amount is often hundreds or even thousands of dollars less per month than their current minimum payments and when the bankruptcy plan ends, most remaining debts are fully discharged and eliminated. While this may not sound ideal, chapter 13 offers unique advantages over other types of bankruptcy.
- Stop foreclosure and save your home. One of the biggest advantages of filing bankruptcy under chapter 13 is that it may enable debtors to save their home from foreclosure and cure delinquent mortgage payments over time. It also stops other types of collection activity, including collection calls and wage garnishment.
- Protect your cosigners. Another advantage is that chapter 13 can protect cosigners from personal liability and collection activity that might occur if the debtor filed chapter 7 instead. This is really important to debtors whose friends and family members cosigned loans or other debt obligations.
- Keep non-exempt property. Debtors who file chapter 7 can only protect property within the applicable exemption categories and aggregate values. Chapter 13 can allow debtors to protect and retain additional non-exempt property by incorporating property value into the repayment plan.
- Versus debt consolidation. While chapter 13 does technically ‘consolidate’ debt into one monthly payment, it is very different than debt consolidation. Most importantly, it enables debtors to discharge and eliminate remaining debt when the bankruptcy plan concludes without fully repaying the debts.