Hafemeyer Law

Bankruptcy: Advantages to Filing a Chapter 13

Once the decision has been made to file bankruptcy, it is important to determine which type of bankruptcy filing accomplishes your goals.  Chapter 7 is commonly called a “liquidation,” and offers individuals the ability to discharge most of their unsecured debt. However, in order to qualify for a Chapter 7 filing, the individual must qualify under the means test. For some debtors, there are too many assets or too high of income to pass the means test. For these individuals a Chapter 13 filing may be a good option.

Unlike Chapter 7, Chapter 13 bankruptcy filings require individuals to make payments to their creditors, typically over a 5 year period. These payments are set at an affordable amount and operate similarly to a debt consolidation. Under the “plan” debtors make a pre-set payment amount each month to the Trustee. The Trustee then distributes the payments to the individual creditors. There is no direct contact with the creditors by the debtor while under the plan and Chapter 13 protection.

One advantage to Chapter 13 is that it can assist debtors who are behind on their mortgage payments and facing foreclosure from their lender. Mortgagors are able to cure past delinquencies and bring their mortgage back into good standing. While under the plan individuals continue to make their mortgage payments. Other liabilities that are secured by an asset, beyond the primary residence, are re-scheduled for payment at a later date to allow the financial means to make payments on the primary residence.

If you are facing foreclosure and would like to see if Chapter 13 is a viable option to save your home, please call my office and schedule a consultation to meet with me and discuss your individual situation.

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