There are two types of bankruptcies consumers most often file. The most common is a Chapter 7 bankruptcy but many people find Chapter 13 to be more beneficial. While it’s true that some people must file a Chapter 13 because they do not qualify for a Chapter 7, others file Chapter 13 because of the many benefits it has over a Chapter 7. Below are some reasons to consider filing a Chapter 13 bankruptcy.
- Save a Home from Foreclosure – Chapter 13 allows mortgage arrears to be paid over the life of the Chapter 13 plan (36-60 months). The bankruptcy will stop the foreclosure and allow the homeowner time to get caught up on payments to save the home.
- Avoid or Strip a Second Mortgage – If a homeowner owes more on their first mortgage than their home is currently worth they may be able to eliminate or strip the second mortgage lien from a property’s title in a Chapter 13 bankruptcy.
- Cram Down Interest Rates – In most cases interest rates can be lowered for secured debt in a Chapter 13. This includes secured debt for cars and even household goods.
- Cram Down Car Value – If more is owed on the vehicle than it is worth the amount paid to the car creditor in a Chapter 13 can be crammed down to the fair market value.
- Preserve Your Chapter 7 Option – Chapter 7 can only be filed once every eight years. While a person may need bankruptcy protection now to stop wage garnishment or creditor harassment they may also be anticipating more debt. For example if a person has a medical condition and know they will be incurring medical bills due to cancer or another illness they may need the option of including the new debt in the future. A Chapter 13 can be converted to a Chapter 7 in the future and debt incurred after the original Chapter 13 filing can be included in the converted Chapter 7 case. To convert a person still must qualify for a Chapter 7 based on income and other factors that a bankruptcy attorney can explain in detail.
- Length of Time on Credit Report – A Chapter 13 bankruptcy remains on a person’s credit report for seven years whereas a Chapter 7 will show up for 10 years.
- More Affordable – In some cases a Chapter 13 plan payment may be less than what a person is paying for their car, and the car would be included in the Chapter 13 plan payment. By cramming down interest rates and loan values a Chapter 13 could save money in the long run compared to keeping the car in a Chapter 7 bankruptcy.
There are many factors to consider when deciding which bankruptcy case may be right for you. Chapter 7 and Chapter 13 are both great options for solving financial problems. However, before you choose which chapter to file, make sure you have all the facts and speak to an experienced bankruptcy attorney. Most offer free initial consultations and I would recommend speaking to a local attorney in your area about what benefits you may expect from filing a Chapter 13 bankruptcy.
If you have questions regarding bankruptcy in Indiana please contact Jackson & Oglesby Law at (877) 489-0908 or visit us at www.IndyBankruptcyLaw.com. Jackson & Oglesby Law can assist you with all aspects of your bankruptcy case. If you have questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping foreclosure or wage garnishment, avoiding liens, stopping law suits, discharging debt, etc. we can help! Please call us today for your free phone consultation to determine which bankruptcy may be right for you.