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 disburse payments to your Creditors.
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.
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.
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.
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.
You can discharge more debts in a Chapter 13
Certain Debts which cannot be discharged in Chapter 7 can still be discharged in Chapter 13. For example, money owed as part of a divorce or property settlement cannot be discharged in Chapter 7 but can be discharged in Chapter 13. There are other types of Debt which can be discharged in Chapter 13 but not in Chapter 7.
You can Pay Non-Dischargeable Tax Debts without further Penalty or Interest
If you owe income taxes for a year that is more than 3 years prior to filing your Bankruptcy Petition, those income taxes are usually dischargeable. Income Taxes for years less than 3 years prior to filing your Bankruptcy Petition are non-dischargeable. Chapter 13 does, however, allow you to pay these non-dischargeable taxes over a period of 3 to 5 years without further Penalty or Interest.
You can convert to Chapter 7 at a later time
Just because you file a Chapter 13 case does not mean that you have to stay in it for the entire 3 to 5 year period. At anytime, you can voluntarily dismiss your Case. Moreover, you also have the right to convert your case to Chapter 7 should your finances change. The right to dismiss is helpful to many people who are experiencing only short-term financial problems. The right to convert is valuable to people who expect to incur substantial expenses, such as medical bills in the future.
You will learn to budget you money better
In addition to the Financial Management Course, Chapter 13 requires you, with your Attorney, to create a realistic budget. For many people, this may be the first time they analyze their finances and understand just how much money they are making and how much they are wasting. Budgeting is the key to Financial Freedom and Chapter 13 is designed to help you learn how to Budget
You can include attorney's fees and costs in your bankruptcy
Most Chapter 7 attorneys require you to pay most, if not all, of your bankruptcy fees and costs prior to the filing of your case. In a Chapter 13 your attorney's fees and costs can be included in your plan and you do not have to come up with a large sum of money to file for bankruptcy.