WHAT IS CHAPTER 13 BANKRUPTCY?
Posted on 01 16,2014
Many people understand Chapter 7 bankruptcy, in which unsecured consumer debt is discharged, and this is the most commonly filed form of bankruptcy. The process of filing Chapter 13 is far different, and could be the right solution for you, particularly if you are trying to avoid losing your home through foreclosure. Chapter 13 is also known as "wage-earner's bankruptcy," as it is often the appropriate solution for those who don't qualify for Chapter 7, as they are above the state's median to be eligible, and are currently earning an income as an employee, or as a self-employed person.
Chapter 13 bankruptcy has many significant advantages, one of which is that if you are in trouble with your mortgage, and have fallen behind, you can resolve this problem and get back on track by filing this form of bankruptcy. In Chapter 13, all of your overdue debts are collected, and then a repayment plan is established. This repayment plan involves an evaluation of how much disposable income is available to you. Once this is determined, you make one payment every month that is disbursed to your creditors. If you have overdue mortgage payments and have received a foreclosure notice, it is important that you act quickly if you want to keep your property. Once the bankruptcy has been filed, all creditor actions must cease, under court order, called an "automatic stay." The lender cannot proceed to foreclose upon your home while the details of your bankruptcy and the repayment plan are being worked out.
One advantage to filing Chapter 13 is that you have the opportunity to renegotiate the terms of your various loans. The fees for late payments and punishing interest rates can be negotiated down. If you have a 2 nd or 3 rd mortgage or liens on your home, it may be possible to "strip" this mortgage, and allow you to pay only pennies on the dollar when the bankruptcy is finalized. At the end of the 3 – 5 year repayment plan on your debts, the rest will be discharged, and you will finally be free.
Find out more about filing Chapter 13 bankruptcy by contacting David McCormick Law Group in Virginia Beach. We can review your situation and offer you trusted advice so you make the decision that is right for you. Call now.