If you are overwhelmed by debt, you may decide to seek relief by filing for bankruptcy. Two of the most popular bankruptcy options are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcies rid a debtor of practically all of his or her unsecured debt without requiring repayment to the lenders. However, it can be difficult to qualify for this type of bankruptcy. Qualification is dependent on a means test that reviews the amount of disposable income that you have. Nevertheless, if your disposable income is too great, you may still qualify for Chapter 13 bankruptcy. However, with Chapter 13 bankruptcy, you are required to pay back a portion of the debt that you owe. Still, Chapter 13 bankruptcy has its advantages. Here are two:
One of the best benefits of Chapter 13 bankruptcy is its ability to prevent your home from entering foreclosure. A bank can usually demand payment of all of your past due monthly mortgage payments at once. However, if you are having financial difficulties, paying back a huge lump sum to cover your past due mortgage note can be difficult. Without the protection of a Chapter 13 bankruptcy, some debtors lose their homes.
People who file Chapter 13 bankruptcy are able to determine the repayment terms of their past due mortgage debt. The overdue mortgage payments can be broken down into smaller, more manageable payments than those that were a part of the original mortgage agreement. The smaller payments can remain in effect for the duration of the Chapter 13 repayment plan.
Lowered Car Payments
If you qualify for Chapter 13 bankruptcy, your car payments may be lowered. Chapter 13 debtors may be able to change the automotive loan value to match the value of the car. This is an important benefit for people who purchase an overpriced vehicle and end up owing more than the car is worth.
Chapter 13 bankruptcies last between three and five years. For that period, the debtor must use all of his or her disposable income to repay debt. Even though the repayment terms can be restrictive, the plan can provide relief by drastically reducing the total amount owed. In addition, after the bankruptcy period is complete, you can handle your disposable income as you desire.
If you would like to see if a Chapter 13 bankruptcy could be beneficial for you, contact a bankruptcy attorney, such as Curtis H. Hatfield Attorney At Law, today.