Chapter 13 Bankruptcy

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CHAPTER 13-RIGHT FOR YOU

Chapter 13 provides remedy: Chapter 13 bankruptcy could be the best way to resolve your debt problems. When you file for Chapter 13, you agree to repay all or a portion of your debts over time, under the supervision of the bankruptcy court. Chapter 13 allows you to keep your property while using your income to repay some or all of your debts. In contrast, chapter 7 bankruptcy allows you to immediately wipe out many debts, but in exchange, you must give up any property you own that isn’t protected by state of federal exemption laws. Chapter 13 bankruptcy is the better remedy for your debt problems. 

Prevent foreclosure or repossession: Chapter 13 can be a good solution for people who need time to pay off certain debts and who have enough income to meet the chapter 13 requirements. In chapter 13, you get to keep all of your property, regardless of its value. However , you will have to pay your unsecured debtors ( those to whom you owe credit card debts, medical debts, and most court judgments, for example) the value of the property you would lose if you filed for chapter 7 bankruptcy. If you are facing foreclosure on your home, Chapter 13 provides a powerful remedy. You can keep your home by proposing a feasible repayment plan that includes your missed payments, as long as you stay current on your mortgage.

Reducing your secured debts: Even under the current law, you can sometimes get rid of liens on your house using Chapter 13.This might be an option if the current value of your home is less than or equal to what you owe on your first mortgages, leaving no equity to secure second or third mortgages. In this situation, you can use Chapter 13 to ‘’strip off’’ the other mortgages and reclassify these obligations as unsecured debts that need not to be paid off in full in your chapter 13 bankruptcy.


Plans of payments in Chapter 13: In chapter 13 bankruptcies, a debtor with a regular income proposes to a bankruptcy court a plan for extinguishing his or her debts from future earnings or other property over a period of time. In such a bankruptcy, the debtor normally keeps all or most of the property. During the period the plan is in effect, which can be as long as five years, the debtor makes regular payments to a chapter 13 trustee. The trustee, in turn, distributes the money to the creditors. Under certain circumstances, the Bankruptcy court may approve a plan permitting the debtor to keep all property even though the debtor repays less than the full amount of debts. Certain debts not dispensible in Chapter 7, such as those based on fraud, may be discharged in Chapter 13 if the debtor successfully completes the plan.

Advantages of chapter 13 bankruptcy: Chapter 13 offers debtors an opportunity to save their homes from foreclosure. Additionally Chapter 13 allows individuals to reschedule secured debts and extend them over the life of the repayment plan. Chapter 13 also has a special provision that may protect third parties like co-signers who are liable with the debtor on outstanding debt obligations. 

 

Ways in which Chapter 13 bankruptcy outperforms debt settlement
With the present economic situation, an increasingly large number of people are worried about their personal debt ceiling as they have been raising it a number of times to make ends meet. As the commodity prices are spiraling out of control, most people in the US are struggling to meet their debt obligations with the meager funds that are there at their disposal. Most debtors, who feel that it’s impossible to eliminate their debt burden with efforts of their own, pursue either debt settlement or Chapter 13 bankruptcy. The debt settlement agents make lot of fake promises to reduce a major portion of your outstanding balance but at the end of the process all the money of the debtor goes in vain. There are some financial analysts who are of the opinion that bankruptcy is better than debt settlement. If you’re not sure ‘how’, you have to read the concerns of this article.

Chapter 13 bankruptcy lets you negotiate with your creditors in a single proceeding
When you file Chapter 13 bankruptcy and your repayment plan is agreed, this is binding to all your creditors, the credit card companies as well as the Internal Revenue Service. On the other hand, when you work with a debt settlement company, they will work with the credit card companies and they will not help you with your IRS tax debts where you’re defaulting. The creditors can’t even sue you as the automatic stay that is imposed will hinder them from doing so.

The amount that you save through debt forgiveness in Chapter 13 is not taxable
Are you aware of the fact that the debt that is forgiven by the creditors through debt settlement is subject to tax as it is considered as your additional income. The creditor needs to send you a 1099 form mentioning the amount that you’ve saved so that you can stay clear about the amount that you have to pay as taxes on this amount. On the other hand, Chapter 13 bankruptcy is better than debt settlement as the debts that are lastly forgiven by the creditors aren’t subject to tax.

Bankruptcy offers you more control than debt settlement
If you choose to settle your debts through a debt settlement plan, you have to negotiate with your multiple creditors and tell them about the financial hardship that is barring you from making the multiple payments on time. But if you submit a Chapter 13 payment plan to the court based on the repayment ability and if the trustee feels that the plan totally complies with the bankruptcy law, you need not worry about negotiating with your creditors in person.

Auto loans can even be modified in Chapter 13 bankruptcy
If you purchase a car and the original loan that you take out for buying that car is not more than 910 days old, you can make the Chapter 13 bankruptcy trustee force the lender to modify the loan, if you’re facing hardship with that secured loan. There are a number of people who use Chapter 13 bankruptcy to modify their car loans and reduce the interest rates to as low as 4.15% and thereby facilitate the repayment procedure.
Most debt settlement agents play on the myths of the debtors and make them believe that bankruptcy trashes their credit score and debt settlement doesn’t. But this is far from being true. Both debt settlement and bankruptcy stays on your credit report for at least 7 years and you have to take solid steps on your own in order to rejuvenate your credit score so as to become credit-worthy once again.

Written By: Jack Hudson