Understanding Chapter 13 Bankruptcy. How Chapter 13 Can Help You Save Assets.
Filing for bankruptcy can be a difficult time for everyone who faces this last step in the road to salvaging your financial outlook. It generally means that loan debt consolidation and all other options have failed and you have no choice but to surrender assets to repay creditors. However, there can still be an important choice to make even at this late stage of financial trouble, which credit-yogi.com would like to help you with. You can file bankruptcy under either Chapter 7 or Chapter 13 of the federal bankruptcy code. There are significant differences between the two chapters, and if you qualify for Chapter 13 you could receive many important benefits over Chapter 7, particularly concerning your ability to save some of your real assets.
You must qualify for Chapter 13, however, and that can be a bit more difficult than qualifying for Chapter 7. This is particularly true since the government has tightened up the rules on bankruptcy in recent years in the face of what they considered to be abuse of the bankruptcy rules. The requirements to qualify for Chapter 13 aren’t completely clear, but you can get a good idea by figuring your secured debts and unsecured debts hit a specific ranged value dictated by the law. You will then have to subject your income and expenses to a “means test”, which is quite a complex calculation, credit-yogi is happy to help facilitate, performed by the government, to prove that you do not have the means to support your debt.
The easiest way to look at the situation is that under Chapter 7 you have few if any rights to retain assets. Chapter 13, however, operates much like a government run loan debt consolidation program. All of your creditors will be forbidden from pursuing your debts while the Chapter 13 plan is in effect. You do not have to surrender any property to the Chapter 13 bankruptcy trustee to be sold to cover debts. Your finances will be structured into a new payment plan that will replace most of your payments with a lower payment to the bankruptcy trustee, who will distribute money amongst your creditors. Bad credit mortgages, which you may not have been able to get a commercial loan debt consolidation for, could now be incorporated into the Chapter 13 repayment plan.
Other obligations and - loans can also be incorporated into the Chapter 13 repayment plan. Your car loan may also be included. This can allow you to make reduced payments over a time period defined by the Chapter 13 repayment plan and catch up on your debts. You have the chance to keep your home and your car, which would not be guaranteed under Chapter 7.
Beware, however. There are a couple of important obligations that you may not be able to avoid, even under Chapter 13. You’ll want to be completely open and honest with the bankruptcy trustee about your financial status and continuously demonstrate your desire to pay all debts as you can. Most importantly, you may hear people say that you cannot lose your house or car under Chapter 13. This is not true. While the Chapter 13 plan will take into account repayment of past due amounts, it will expect you to keep making your mortgage payment and car payment. The bankruptcy trustee will not sell your property if you fail to do this, but the trustee also may not be bale to block foreclosure and repossession proceedings.
You can get one other advantage in Chapter 13 that may save relationships with family and friends. If you have cosigners on any of your obligations, your debtors are blocked from pursuing the cosigners under Chapter 13. Under Chapter 7, your cosigners would very quickly be receiving calls and letters from any creditors that were not satisfied by the proceeds from the bankruptcy sale of your assets.