What Are the Benefits of Chapter 13 Bankruptcy?

Here are some situations where filing a Chapter 13 bankruptcy may be helpful:

Stop a mortgage foreclosure. Filing for Chapter 13 bankruptcy before the foreclosure sale can stop the foreclosure. However, you will be required to start making your regular monthly mortgage payments beginning with the next payment that is due after your Chapter 13 bankruptcy is filed. The amount you owe on your mortgage before you file Chapter 13 bankruptcy will be included in your monthly Chapter 13 plan payment. You will need to show that you will have enough income to make the monthly Chapter 13 plan payment while also staying current on the post-petition mortgage payments.

“Cram down” secured debts greater than the value of property that secures the debt. You can sometimes use Chapter 13 to reduce a debt of the property securing it. For example, if you owe $5,000 on a car loan and the car is only worth $3,000, you can propose a plan that pays the creditor a secured amount of $3,000. However, under the bankruptcy law, you can’t cram down a car debt if you purchased the car during the 30-month period before you filed for bankruptcy. For other types of personal property, you can’t cram down a secured debt if you purchased the property within one year of filing for bankruptcy.

Why Counsel With a Bankruptcy Attorney?

Although bankruptcy eliminates some debt, it doesn’t eliminate all types of debt. Before you file for bankruptcy, make sure you consult with a bankruptcy attorney to know which debts will be discharged and which debts will remain your responsibility to pay.

What Can Bankruptcy Do For You?

If you are facing serious debt problems, bankruptcy may offer a powerful solution. Here are some of the things bankruptcy can do:

Discharge credit card debt and other unsecured debts. In most circumstances, bankruptcy can eliminate most credit card debt. Besides credit card debt, you may have other unsecured non-priority debts, and bankruptcy may discharge these debts as well. If you file Chapter 13 rather than Chapter 7, you usually have to pay back some portion of the unsecured debts.

Stop creditor harassment and collection activities. Bankruptcy can stop creditor harassment. If a creditor is about to repossess your car or foreclose your mortgage — bankruptcy may help.

What Are Some Limitations To Bankruptcy?

Some debts that aren’t dischargeable include but are not limited to the following:

Child support obligations are not dischargeable.

Generally speaking, bankruptcy will not discharge student loans, except in very limited circumstances.

Tax debts may be dischargeable under certain circumstances, however there are certain requirements that you should discuss with a bankruptcy attorney.

In addition, some types of debts may not be discharged if the creditor convinces the judge that they should survive your bankruptcy.

What Is a Credit Counseling Certificate

Before a bankruptcy can be filed, you must complete a bankruptcy credit counseling course provided by an approved agency which should then provide a Credit Counseling Certificate (which expires after 180 days). This is an extremely important step that must be completed before filing your bankruptcy. Therefore, it is critical that you counsel with a bankruptcy attorney to receive more information on this vital step.