When you file Chapter 13 Bankruptcy you receive an automatic stay. This protects you against all collection activity. The stay has athe power to stop foreclosures, repossessions, garnishments, creditor harrassment, and license suspensions. Debt consolidation cannot give you this protection. A Debt Consolidator cannot give you a court order protection you and your family nor can they force your creditors to stop any of their collection actions.
Includes Many Types Of Debts
All debts, including mortage arrears, car payments, tax debt, can be included in a Chapter 13 Bankruptcy. Debt Consolidators are usually very picky about what debt they want to consolitate and generally does not include mortgage arrears, car payments, and tax debts.
Drastically Reduce Total Amount Of Debt
A Chapter 13 Bankruptcy will allow you (depending on the amount of net available income) to pay back as little as 10% of your unsecured debt. At the end of the payment plan the balance (as much as 90%) will be eliminated. The only thing debt consolidation programs can do is to ask your creditors to lower their interest rates or balances. They do not have the power of the Federal Court or a Federal Judge to order creditors to honor the plan.
Known Time Period
Chapter 13 Bankruptcy plans are usually set up to last 3, 4, or 5 years. At the successful completion of the plan, all dischargeable debts are eliminated. Debt Consolidator plans can, and do, go on for years, without significantly reducing your debt.
No Interest, Late Fees Or Penalties
Chapter 13 bankruptcy usually most debt in existence at the time of filing does not accrue interest, later fees or penalties. All the money you pay into your payment plan will generally be applied to the principal owed. This drastically reduces the time its takes to repay your debts. Debt Consolidators cannot provide this.
Protects Your Equity
Chapter 13 Bankruptcy does not require you to post a performance bond or assign collateral in order to order to obtain relief from your debts. Many Debt Consolidators or home equity loans require you to put your house or other property up as collateral if you cannot make the monthly payments.
Pays The Most Important Bills First
In Chapter 13 bankruptcy your payment plan pays off the most secured loan first and delays payment of unsecured debts. The majority of your Chapter 13 payments will be applied to your mortgage and car payment arrears. Credit card, medical bills, and other unsecured debt will be paid after secured and other priority claims have been paid in full. Debt Consolidators do not have the power to distribute your payments and cannot give prefererential payments to your secured lenders.
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