With the economic downturn a lot of people are looking at bankruptcy as an option to help reclaim financial stability. Both Chapter 7 and Chapter 13 can help you reach this goal; however, Chapter 13 does offer some compelling benefits that are not available in a Chapter 7.
1
Chapter 13 Allows you to Consolidate your Debts in to one Affordable Payment
Chapter 13 is similar to a Debt Consolidation Plan with several big exceptions. First, you do not ordinarily have to pay back all of your debts. Second, your Creditors have no choice but to accept your Chapter 13 Case provided it complies with the Bankruptcy Code. Third, you will make one payment to the Chapter 13 Trustee and they will disperse payments to your Creditors.
2
You can Keep your Home even if you are behind on Mortgage Payments
Regardless of how far behind you are on your Mortgage Payments you can still keep your home by filing Chapter 13. Moreover, you will not be required to make a lump sum payment of all the past due Payments. Chapter 13 allows you to cure the past due Payments by making small monthly payments over a period of three to five years without further Penalty or Interest.
3
You do not have to pay taxes on debt discharged in a Chapter 13 Bankruptcy
This is a huge problem with trying to work out your own arrangements with creditors, or using a debt consolidation company. The IRS considers debt relief a taxable event, whereas, filing bankruptcy protects you from having to claim the amount forgiven as income. In a Chapter 13 you receive a discharge with no tax implications.
4
You may be able to Discharge a 2nd Mortgage in Chapter 13
Depending on the value of your Home and the amounts you owe on your 1st Mortgage, it may be possible to Discharge your 2nd Mortgage in a Chapter 13 Case.
5
You can Keep your Car even if you are Behind on Payments
Regardless of how far behind you are on car payments, you can keep your Car by filing Chapter 13. This is still true even if the car has been repossessed. Provided you file Bankruptcy prior to the car being sold at Auction, the Creditor must return you vehicle to you. Furthermore, you will not be required to cure the default in a lump-sum payment.
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