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Chapter 13 Bankruptcy: An Overview

Protecting Your Property & Assets

According to the United States Courts, chapter 13 bankruptcy is advantageous for several reasons. First, filing for chapter 13 bankruptcy may allow you to keep your home by avoiding foreclosure. When you file for chapter 13 bankruptcy, you foreclosure proceedings will stop and may cure any delinquent mortgage payments you owe.

Sometimes, chapter 13 bankruptcy is called "reorganization" bankruptcy. Instead of liquidating your assets to repay your debt, chapter 13 bankruptcy allows you to establish a repayment plan. In order to file chapter 13 bankruptcy, you must have some source of income; reorganization bankruptcy is based on the idea that you will, gradually, be able to pay off your outstanding debts. If you are not able to do so, you may qualify for chapter 7 bankruptcy instead.

If you don't qualify for full debt relief under Chapter 7 bankruptcy, you may still be able to take advantage of Chapter 13, which is commonly referred to as "wage-earners bankruptcy." It is intended for those who aren't struggling to the degree that it is impossible for them to pay off their debts, but who are having significant difficulties in keeping up with their financial obligations.

Chapter 13 can give you the chance to pay off your debts, focus on credit repair and make a fresh start. It is essentially a program of debt restructuring, where your unsecured loans will be gathered into one group and you will make a single payment every month, rather than several. The payment amount and the timeline for payoff will be calculated against your current financial situation, including income, mortgage or rent and car payment.

When you file for chapter 13 bankruptcy, the law requires creditors to stop attempting to collect your outstanding debts. As soon as you file, debt collectors are no longer able to pursue payments from you. This rule is referred to as "automatic stay." Automatic stay refers to the period of time immediately after bankruptcy is filed. It is designed to give you and your creditor time to arrange your finances before the bankruptcy process begins. Remember: During automatic stay, debtors may still pursue child support, tax debt, and pension loan payments.

Chapter 13 Bankruptcy and Student Loans

Student loans will only be discharged if you are able to demonstrate undue financial hardship. Student loans are treated like child support debt and back taxes. Generally speaking, it is hard to convince a bankruptcy court to discharge you student loans. In order to have your student loans discharged, you must file a separate action. This action is called a Complaint to Determine Discharge ability of Debt. Special circumstances of undue hardship might include:

  • Poverty
  • Permanent disability
  • Good-faith repayment efforts over an extended period of time

Under Chapter 13, you will either be given a 3 or 5 year window to pay on your debts, and the total amount you pay in this period may or may not reduce the outstanding balance to zero. At the end of your allotted time, your debts will be discharged. If you owe money on unpaid taxes, a Chapter 13 filing will place a freeze on the interest so that your payments can go directly toward lowering the principle you owe.

When you decide to pursue Chapter 13 bankruptcy, it is in your best interests to work with an experienced attorney at the firm who can represent you in court to ensure that you enjoy the full benefits of this opportunity and that you are able to regain a position of financial stability as soon as possible. The success of a Chapter 13 petition depends largely on how well you present your budget to the court, and your attorney can help you gather all the relevant documents and accurately calculate the figures that will influence the judge's decision.

Financial Relief Could be Yours

Are facing serious financial hardship? At the Price Law Group, they are experienced in all legal fields related to bankruptcy. If you are struggling to pay off your mortgage every month, Chapter 13 bankruptcy may be a viable option to secure your financial future. Their legal team will give you a consultation when you contact the firm about Chapter 13, to see if this is the best approach to your debt settlement and to help you get started on the bankruptcy process.

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