Many people do not want to file for bankruptcy, but if it is absolutely necessary, they will have to choose between Chapter 7 or Chapter 13. To further understand which your best option is, it is necessary to consult with a Baltimore bankruptcy attorney. Many people often benefit from filing for Chapter 13 bankruptcy which is a payment plan that lasts 3-5 years. The length of this payment plan can be discouraging for some while Chapter 7 bankruptcy may seem initially more preferable. However, there are various advantages that are not available in Chapter 7, and it may be the best solution for your long term financial health.
As mentioned above, there are several benefits of filing for Chapter 13 bankruptcy. Here are views to further understand them:
- Saves your home from foreclosure: This is the first and most commonly known benefit of Chapter 13. When you file for this chapter, the court will typically put a halt to home foreclosure proceedings during the bankruptcy process even if they have already started. Under normal circumstances, the bank will demand borrowers to pay back their full mortgage arrears once they are delayed. For those who struggle financially, this simply is not possible and they end up losing their home. However, Chapter 13 debtors have the ability to dictate the terms of repayment to the mortgage company.
The due amounts are usually broken up into small and manageable chunks that can be paid back over the life of the Chapter 13 plan. This helps the borrower avoid foreclosure as long as they can maintain normal monthly mortgage payments. While filing for bankruptcy does not give you a free house and you will still need to pay the mortgage, it will prevent your lender from foreclosing.
Mortgage Modification: Not only will you be able to dictate your lender the terms in which you will pay back your past mortgage payments, but in some cases you can force them to modify your mortgage. While the bankruptcy code will not allow first mortgages on a debtor’s primary residence to be modified in bankruptcy, your second and third mortgages can be modified through a process called lien stripping. Once your mortgages have been stripped, the debtor can pay their loans and the rest of their unsecured debt.
- Helps with the IRS: If you have problems with the IRS, Chapter 13 helps in discharging some taxes as unsecured debts. Taxes that need to be paid in full are paid more economically since the IRS is not paid interest on the tax. Penalties are usually paid as unsecured debts even if the tax giving rise to the penalty should be paid as a priority claim. Also, tax liens can be crammed down and removed from property. You can pay much less than the amount of the lien depending on how much equity there is on the property.
- Reduces your car payments: Lien striping is a process which modifies secured debt to meet the value of collateral which can also apply to car loans. Those with car loans will have the option of “cramming down” the loan to match the value of their car. However, this is only available if you purchased your car in the last 910 days.
- Silence Creditors: When you file for bankruptcy, the automatic stay can prevent most creditors from hassling you throughout your case.
Being aware of the many benefits Chapter 13 bankruptcy has to offer, especially if you are delayed on secured debts or you are facing foreclosure, you may now consider filing. If you are in need of a reputable Baltimore bankruptcy attorney, call up Richard Hackerman who can help you understand your situation and act accordingly to avoid further problems in the future. Contact him at 410-243-8800 or 888-243-5500.