Many think that bankruptcy is the final station on the train to financial ruin, but statutes under Title 11 of United States Code sets forth provisions that can help one maintain hope and bounce back. An individual struggling under the duress of debt can typically file for bankruptcy either under Chapter 7 or Chapter 13. Under Chapter 13 bankruptcy, an individual has the opportunity to reorganize their finances and avoid losing their assets. It enables someone with a regular source of income to propose a plan to repay their creditors over a three- to five-year period, and the courts have the power to approve the plan without the approval of the lenders as long as it meets certain requirements. This is in contrast to Chapter 7, which provides for discharge of certain debts and liquidation of non-exempt assets without giving any rights towards coming up with a plan of reorganization.
The borrower’s financial characteristics and the nature of relief desired play an important role in deciding among the choice of chapters. In some cases, the borrower may not have enough disposable income to qualify for a Chapter 13. Chapter 13 is a way for those with sufficient income to repay all or part of their debts and avoid a liquidation event. However, there are varying limits in place as to how much unsecured or secured debt can one discharge under Chapter 13. One may say that Chapter 13 is bankruptcy for those whose problem is meeting creditors’ demands for immediate payment, not lack of income.
While a Chapter 13 is active, the creditors cannot attempt to collect on the debtor’s historically incurred debt except through the bankruptcy court. In general, the creditors end up with less money than they would have got, had the outstanding loan amount continued to collect interest. The rescheduling of secured debt and extending them over the life of the Chapter 13 plan leads to lower payments. This allows the borrower a way to pay back what’s owed without losing one’s assets completely. The most attractive feature of Chapter 13 is that it offers one an opportunity to protect their homes from foreclosure. By filing for Chapter 13 Bankruptcy, a borrower can stop all foreclosure proceedings and attempt to cure their delinquent mortgage payments over a period of time. Chapter 13 also forbids creditors from undertaking collection activities against non-filing co-signers.
The downside to filing for a Chapter 13 is that a record of it stays on your credit report for a period of seven years. However, it is possible to obtain auto loans, credit cards and other consumer loans after a period of 12-24 months. When it comes to mortgages, one can get a new FHA mortgage loan 25 months after discharge, while one needs to wait for 36 months before applying for a Fannie Mae and Freddie Mac loan. However, while a Chapter 13 case is pending, the borrower cannot apply for additional credit without the permission of the bankruptcy court. Moreover, creditors may deem such individuals as risk prone and may not be willing to extend credit to them. However, this disadvantage isn’t unique to Chapter 13 and applies to other forms of bankruptcy as well.
It is important to note that filing for bankruptcy is one of the most important decisions that an individual may take over his or her lifespan. While keeping one’s home can be a major relief, one must not forget that one is required to spend years living under the supervision of a court-appointed trustee who will collect and distribute one’s payments. Given the long term bearing that a Chapter 13 Bankruptcy filing can have on one’s life, it is advisable to consult an expert, such as a Chapter 13 Bankruptcy Attorney. A Chapter 13 Bankruptcy Lawyer can help you arrive at the best possible plan that meets all the statutory requirements and ensure that the process goes smoothly. The legal industry is well aware of the financial strain that individuals considering filing for bankruptcy must be facing, and hence there are several professionals who provide affordable Chapter 13 Bankruptcy services. A quick search can ensure that one finds the best Chapter 13 Bankruptcy attorney for one’s needs.