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Chapter 13 Bankruptcy | Phoenix Law

On Behalf of | Nov 5, 2018 | Uncategorized

Filing for bankruptcy is often a person’s last resort when they have overwhelmingly huge amounts of debts they cannot pay. However, many people believe that Chapter 7 is the best branch to use; while it is in certain cases, there are times when Chapter 13 is the better option. Here are several ways Chapter 13 offers relief in ways that Chapter 7 cannot.

Offers a Way to Stop a Foreclosure

Facing a foreclosure of your house is probably one of the scariest things you will ever go through. When your lender sends you this type of notification, you will have to act quickly if you want to avoid losing your house. There are only a couple options to choose from when this situation happens if you want to keep your house, and filing for Chapter 13 is one of these.

When you complete the paperwork for a Chapter 13 filing, your lawyer sends it to the court. The court notifies all your creditors and tells them to stop collection efforts. When this occurs, your lender must legally stop the foreclosure proceedings.

Your lender must follow the order the court gives, which will include a repayment plan that lasts for three to five years. This repayment plan gives you up to five years to pay your lender the money you owe, including the arrears, and you will not have to worry about the foreclosure occurring during this time as long as you make your payments.

Gives You Time to Catch Up on Non-Dischargeable Debts

The second benefit Chapter 13 offers that Chapter 7 does not offer is the repayment plan. Chapter 7 wipes out unsecured, qualifying debts, but it does not help people who have past-due balances on non-qualifying debts.

For example, if you owe the IRS thousands of dollars for back taxes, Chapter 13 will allow you to include this amount in your repayment plan. The IRS must stop collection efforts during this time and must accept the repayment plan schedule.

The same is true for child support, alimony, and student loans. In fact, you can include almost any type of debt in your repayment plan. The goal is to give you a chance to make good on your debts during this time. As long as you make every payment, you will have no past-due balances when you complete your plan.

Let’s You Keep Your Assets

The other benefit of Chapter 13 compared to Chapter 7 is the ability you have to keep the belongings you own. The tradeoff in Chapter 7 is that the court has the right to seize your assets to sell them, which they do to raise money to use to pay off your creditors.

If you have assets and do not want to lose them, you would have to choose Chapter 13 and not Chapter 7. In Chapter 13, you agree to repay your debts. Because of this agreement, you get to keep the things you own, which can include vehicles, cash on hand, inheritance money, and valuable personal belongings. If you decide to use Chapter 7 instead, you risk losing all these things.

Before you can choose Chapter 13, you will need to talk to a lawyer to find out if this decision is the right option. In many cases, there are ways to save a home and repay debts without filing for bankruptcy; however, every case is unique.

Before you make any decisions about bankruptcy or how to handle your financial problems, talk to an experienced attorney. Schedule an appointment with an experienced bankruptcy lawyer by contacting Phoenix Law to discuss your options during a free initial consultation.