If you are in serious debt, you have the opportunity to file for bankruptcy. Although filing for bankruptcy may affect your credit, reputation, and self-image, it can also improve your quality of life by allowing you to rebuild your credit. However, you will have to decide whether to file for Chapter 7 or Chapter 13 bankruptcy. This post highlights the key benefits of filing for Chapter 13 bankruptcy.
Only Pay What You Can Afford
In a Chapter 13 bankruptcy case, your income determines your payment. Notably, if your monthly income is lower than the state median, your payment plan will last for three years. However, you will get a five-year repayment plan if your income is higher than the applicable state median. Essentially, your Chapter 13 bankruptcy attorney helps you develop a budget for monthly debt repayment to a trustee. This payment to the bankruptcy trustee is the discretionary income calculated as your total monthly income minus a combination of monthly expenses prescribed under Chapter 13 standards. If you do not have a discretionary income after paying your expenses, your attorney can help you defer the payments until you have sufficient income. Such considerations allow you to pay only what you can afford.
Discharge Your Debt
In most cases, debtors do not pay all that they owe under Chapter 13 bankruptcy. Instead, you get to pay what you can afford over 3-5 years. Typically, Chapter 13 bankruptcy stops further interest from accruing on your debt. Then, you have to pay the remaining debt from the day you file for bankruptcy. This waiver on accruing interest is supposed to help you repay your debts within the stipulated duration. If you haven't cleared your debt up all the way by the end of the repayment duration, the balance is discharged. As such, the provisions of the debt repayment plan allow you to repay a fraction of what you owe.
Save Your Home
You can save a mortgaged house when you file for Chapter 13 bankruptcy before the foreclosure date. Essentially, the provisions of Chapter 13 bankruptcy allow you to pay your mortgage arrears in the 3-5 year repayment plan. However, the bankruptcy court will still expect you to continue making regular monthly mortgage payments after filing the case. Filing for Chapter 13 bankruptcy will also allow you to remove additional mortgages, leaving you with only your first home loan. If this situation may apply to you, your Chapter 13 bankruptcy attorney will analyze whether you qualify for stripping a lien off the home. Should the court approve, then you'll only need to pay off your first mortgage.
Contact an experienced Chapter 13 bankruptcy attorney, like Ozment Law PA, to help you wipe out your dischargeable debts for a fresh start.