Chapter 13 bankruptcy is an often overlooked form of debt relief. It allows individuals to reorganize their debt and make payments based on their income and ability to pay while also protecting them from creditors. Here are 10 ways Chapter 13 Bankruptcy can help:
1. Stop Foreclosure
A Chapter 13 bankruptcy filing will immediately stop a foreclosure against your home by putting an “automatic stay” in place that prohibits creditors from collecting any money owed until the bankruptcy case is resolved.
2. Reduce Your Home Loan Balance
In some cases, you may be able to reduce your home loan balance through a process called lien stripping, which eliminates certain liens secured by your property that are no longer necessary. This reduces the amount of money you owe on your loan.
3. Reduce or Eliminate Your Second Mortgage
You may also be able to reduce or eliminate your second mortgage through a process called lien avoidance, which allows you to avoid the payment of a secured debt if it is no longer necessary for the purposes of protecting your home. This can make your monthly payments more affordable and help you get out of debt faster.
4. Stop Wage Garnishment
Filing for Chapter 13 bankruptcy will put an immediate stop to any wage garnishments that have been issued against you, allowing you to keep more of your income each month and use it toward paying off other debts.
5. Reorganize Your Debts
A Chapter 13 bankruptcy reorganizes all of your debts into one monthly payment that is more manageable for you. It also allows you to catch up on past due payments over a three-to-five year period, giving you more time and flexibility to get back on track.
6. Reduce Your Interest Rates
Under Chapter 13 bankruptcy, you may be able to reduce the interest rates on certain debts, which can make them easier to pay off in the long run.
7. Stop Harassing Calls from Creditors
The automatic stay put in place when filing for Chapter 13 will stop creditors from attempting to collect any money owed until the case is resolved. This includes stopping any harassing phone calls or other communication related to the debt.
8. Reduce Your Car Loan Payment
You may be able to reduce the payment on your car loan if you have negative equity in it. This can help make the debt more manageable and help you pay it off faster.
9. Keep Your Assets
Chapter 13 bankruptcy allows you to keep all of your assets, such as your home or car, even if they are worth more than what is owed on them. This can provide some much-needed financial relief during difficult times.
10. Get a Fresh Financial Start
When your Chapter 13 repayment plan is completed, any remaining balances on eligible debts will be discharged, giving you a fresh start with your finances and allowing you to move forward without the burden of debt.
These are just some of the ways that filing for Chapter 13 bankruptcy can help you get back on track with your finances. It is important to speak to a qualified, experienced and knowledgeable attorney about your specific financial situation, as this type of bankruptcy may not be the best option for everyone. With the right advice and guidance, however, it can be an effective way to regain control of your debt and get a fresh start.