The Benefits of Filing Chapter 13 Bankruptcy
When you think of bankruptcy, you may associate it with a variety of negative things, but filing Chapter 13 bankruptcy can actually be a very positive way to handle your financial struggles. It is a payment plan that lasts for three to five years, and that can be intimidating for some people. However, there are many advantages to filing Chapter 13 bankruptcy.
Pay What You Can Afford
Chapter 13 bankruptcy will take all of your debts and roll them into one payment that your bankruptcy trustee will use to pay all of your debts. The payment you make each month to the trustee is based on what you can afford and will be determined by you and your attorney and submitted for approval of the court.
The budget the court will take into consideration is a combination of your monthly expenses, IRS standards, and the bankruptcy trustee. Your income, minus the expenses, will determine your payment. The amount paid to the trustee may also be called your discretionary income. Even if you feel like you do not have discretionary income, your bankruptcy attorney can help you create a payment plan or defer payments until you have the income to make the payments.
Filing Chapter 13 Bankruptcy Will Discharge Your Debt
Since you are paying only what you are able, you may not be able to pay the total amount of your debt in a period of three to five years. Most people who file Chapter 13 bankruptcy do not manage to pay back 100% of their debt. The amount that you are unable to pay over the course of the plan will be handled the same as it would be if you had filed Chapter 7 bankruptcy. It will be discharged, or wiped out, so you can have a fresh start.
Save Your Home
Chapter 13 bankruptcy will allow you to take any past due payments on your home mortgage and pay them back over a period of three to five years in your payment plan. These past due payments are called arrears. As long as your bankruptcy is filed before the foreclosure date of your home, you will be able to take advantage of this benefit. The important thing to keep in mind though is that you must still be able to make the regular monthly payments on your mortgage after your bankruptcy is filed.
Remove Your Second or Higher Mortgages
What happens to the second or third mortgages on your home if you can only afford to pay the first one? Chapter 13 bankruptcy offers an option called lien stripping. To qualify for lien stripping, the value of your home must be less or equal to the value of your first mortgage the day your bankruptcy was filed. If you qualify, your additional mortgages will be stripped from your property and included in your bankruptcy discharge.
Find Out if Filing Chapter 13 Bankruptcy is Right for You
The attorneys at Cornwell Law Firm have years of experience dedicated to helping people get back on their feet financially. We can advise you if Chapter 13 bankruptcy is right for you and represent you in court to ensure you get the outcome that you deserve. Contact us today to schedule a consultation.