Six Super Advantages of Filing for Chapter 13
Chapter 13 bankruptcy (also known as reorganization bankruptcy) is often misunderstood and confused with Chapter 7. In most cases, reorganization bankruptcy is for people who have equity in property that they do not want to liquidate in order to pay off creditors and/or people who have a low enough income to debt ratio to pay their normal living expenses and some of their debts.
Here are some its advantages :
1. It doesn’t as negatively affect credit
Unlike Chapter 7, which generally wipes out all debt and gives a fresh start, but also negatively affects credit scores for a long period of time, Chapter 13 can remove a large portion of debt without causing nearly as much negative effect on credit.
2. It makes the creditors go away
In this instance, filing a reorganization bankruptcy typically results in an immediate stay and discharge. Under this court order, creditors are no longer able to call to request repayment, garnish wages or seek legal action to recoup on their loans.
3. Property won’t be liquidated
The home or vehicle that people have worked so hard to obtain is protected. Debtors are able to continue living in their property, regardless of equity. So even if the home has grown in value, it cannot be liquidated to pay off creditors.
4. Debts will be reduced
Creditors will still get paid; however, in most cases, the debts are considerably reduced. Best of all, payments will no longer be made to individual creditors; instead, a single monthly payment is setup with the bankruptcy trustee to pay off debts.
5. It blocks foreclosure and repossession
In the case of being behind on the mortgage or auto loans, reorganization bankruptcy can create a solution. By filing bankruptcy this way, you successfully block any home foreclosure or property repossession. This is the case because the bankruptcy law stipulates that people will still pay their mortgage and property loans, including back payments.
6. It protects co-signers
Chapter 13 also protects cosigners from creditors calling for repayment of debt, filing leans against them, and seeking lawsuits against them.
People may have bitten off more than they can chew, or financial circumstances may have changed in such a way that they can no longer cover all their debts. However, remember that this doesn’t make them a bad people. It does make them people in need of help, and a reorganization bankruptcy can be the solution.
