The Long-Term Advantages Of Chapter 13 Bankruptcy
People that are considering filing bankruptcy often first think of filing Chapter 7. A Chapter 7 bankruptcy will discharge most, if not all, of your debt and allow you a fresh start with a clean financial slate. Those that do not pass the Chapter 7 means test, or that otherwise do not qualify, may have to file under Chapter 13. If you are in this position, it is easy to become discouraged, but you should not. There are many long-term advantages of Chapter 13 bankruptcy, and they are listed below.
You Only Pay What You Can Afford
During the bankruptcy process, a bankruptcy trustee will create a repayment plan in which you will repay the majority of your debts. You will have to make a payment every month to the trustee, and they will distribute it to your creditors. While it is easy to see these payments as a burden, they are not. You will only have to pay what you can afford and sometimes, payments can even be deferred until you are better able to afford them.
Debt is Still Discharged
The debt repayment plan is a major component of Chapter 13 bankruptcy, but that does not mean you will have to repay your debt entirely. You likely will not have to pay 100 percent of your debt and even if you can afford to repay it entirely, interest will not accrue on that debt. You will only have to repay the balance that was on the debt at the time of filing.
You Can Save Your Home
Many people file Chapter 13 bankruptcy instead of Chapter 7 because it gives them a better chance of saving their home. If you are behind on your mortgage payments, these can be included in the repayment plan and you can repay the arrears within three to five years. However, to save your home, you must file bankruptcy before the foreclosure sale date to take advantage of this benefit.
Remove Other Mortgages
It is not uncommon for people to have a second or third mortgage on their home when they file Chapter 13 bankruptcy. After all, they have fallen into financial hardship and sometimes, an additional mortgage loan can help get them out of trouble. Through a Chapter 13 bankruptcy, these second mortgages can be removed. This is a process called lien stripping.
To qualify for lien stripping, the value of your home must be equal to or less than the amount you owed on the first mortgage on the day you filed bankruptcy. If the court approves the lien stripping, the additional mortgages are not included in your repayment plan and the debt will be discharged once the case is final.
Our Bankruptcy Lawyer in Orlando Can Help You Through the Process
If you have fallen into financial hardship, our Orlando bankruptcy lawyer at Anderson & Ferrin, P.A. can advise on which type is right for you, and help you throughout the entire process. Call us today at 407-412-7041 or fill out our online form to schedule a free consultation.