How Will Filing Chapter 13 Bankruptcy Benefit You?
In Chapter 13 bankruptcy, you offer a repayment plan to your creditors, and it usually lasts three to five years. It offers to pay off all or part of your debt from any future income you earn. You can use Chapter 13 to make up missed car payments, pay taxes you owe, prevent the bank from foreclosing on your house, keep non-exempt property you value, stop interest accruing on your tax debt, and much more. When you follow the terms of your debt settlement agreement, all of your remaining dischargeable debts will be discharged at the end of the repayment period. The amount of money awarded to creditors in a Chapter 13 bankruptcy must be equal to the amount they would have received if a Chapter 7 bankruptcy had been filed. To file for Chapter 13 bankruptcy, you must have a “regular source of income’ and disposable income to apply to your payouts.
Typically, Chapter 13 bankruptcy is used when you want to keep secured assets, such as a car or house, where you have more equity in the secured assets that you can protect by using your bankruptcy exemptions. This is a reorganization of debts you owe to your creditors that are not non-dischargeable debts.
Chapter 13 bankruptcy allows you to make up your delinquent payments over time and restore your original repayment agreement. It may also be a better option when you have valuable unexempt property that you want to keep. To keep a non-exempt property, you must pay the lender the value of the property.
An exemption restriction will apply to any equity you have in the property. Equity is simply the difference between the property’s value and what you owe on it. For example, if you have a truck valued at $10,000 with a loan of $8,500, the truck only contains $1,500 in equity. When you have a property held by a loan, the equity you own in that property is covered by your exemptions. That is if you keep up with your payments. Additionally, if you choose to continue making your regular loan payments, you can retain ownership throughout and after the bankruptcy term is over. If the home equity isn’t covered by your exemptions, your lender may choose to sell that asset and then distribute the proceeds from the sale. In this case, you will be entitled to the value of your release in the sold asset as a cash payment. Current bankruptcy laws allow a married couple to file together for each claim with a full set of exemptions, meaning more assets can be protected.
Nondischargeable debts that you cannot discharge in bankruptcy include DWI/DUI personal injury/death debts, child support, alimony, family support debts, student loans, income tax debts through the last three years, as well as any other tax debts, toll fines, criminal restitution, and any debts you forgot to list in your bankruptcy documents unless you tell the creditor about your bankruptcy case. Aside from these outstanding debts, everything else included in your bankruptcy case will be discharged at the end of your agreed upon bankruptcy period.
#Filing #Chapter #Bankruptcy #Benefit