Taking the proper steps to file for Chapter 13 bankruptcy can be a favorable option for Milwaukee residents who have financial trouble. This type of bankruptcy requires that debtors use a payment plan to pay off their debts to creditors over three to five years. There are a number of benefits to filing Chapter 13, such as having extended time to catch up on past-due amounts on your secured property (home and vehicles). It also allows you to pay back your unsecured creditors (credit cards and medical debt) with no interest and at an amount you can afford.
If you’re wondering if this bankruptcy option is right for you, here are 5 common reasons people file for Chapter 13 bankruptcy:
Immediately Stop Collection Activities
Bankruptcy allows you to eliminate the legal obligation to pay back most or all of your debts. Immediately after a bankruptcy case is filed, an injunction called the “automatic stay” goes into effect. The automatic stay is one of the fundamental debtor protections provided by bankruptcy laws. It stops all collection efforts, all harassment, and all foreclosure actions. It also permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove them into bankruptcy.
Save Your Property
With the spike in foreclosure rates in the U.S., many homeowners grapple with the possibility of losing their homes to a lender. Filing a Chapter 13 bankruptcy invokes an automatic stay that stops the lender from foreclosing or trying to collect past-due payments. At the Bankruptcy Law Center LLP, we help people like you stop foreclosures and help you save what you have worked so hard to obtain.
A similar scenario may apply to a person’s car. If you are behind on payments, a Chapter 13 bankruptcy can get you caught up and allow you to keep your vehicle. The automatic stay that takes effect upon filing for a Chapter 13 bankruptcy stops the lender from repossessing the car or trying to collect the past due amounts.
Restructure Your Debt
Chapter 13 is a highly effective way to restructure your debt. Restructuring means that the court changes the terms of your contract that created your debt in the first place. Oftentimes, the court will discharge some debt to make it possible for you to pay back most of what is owed. These calculations made by the court typically depend on the amount of debt owed, the number of assets you have, and your income.
You Can Discharge Debt Than You Can in Chapter 7; However, You Can Also Address Debt That Would Not be Handled in a Chapter 7.
Chapter 7 bankruptcy allows you to wipe out (discharge) your debts, such as credit cards, medical bills, and past-due utility bills. However, if you are behind on mortgage or car payments and want to keep these assets, Chapter 7 may not be the right choice for you. Furthermore, if a debtor has had a Chapter 7 discharge within the last 8 years, the debtor will not be eligible for Chapter 7, but may still be eligible to file Chapter 13.
Types of debts you can repay in Chapter 13 (that are not addressed in Chapter 7) include:
- Willful and malicious property damage.
- Debts arising out of a divorce, separation order, or settlement.
- Debt incurred to pay nondischargeable taxes.
Chapter 13 is More Affordable & Less Harsh On Your Credit Report
In Chapter 13, not all of the attorney fees are required upfront, as some can be paid over time through the Chapter 13 plan. Chapter 13 bankruptcy cases only remain on your credit report for 7 Years. Creditors typically look more favorably on a Chapter 13 bankruptcy discharge because you do pay something back, even if it is a small amount. Not to mention, it’s possible that your credit score will actually rise while your case is pending, provided that you make all required payments.
Need Help Filing for Chapter 13 Bankruptcy?
Bankruptcy laws were designed to help people struggling with too much debt to make a fresh start. If you have questions about bankruptcy, we can help. The Bankruptcy Law Center, LLP is a local law firm specializing in Chapter 7 and Chapter 13 consumer bankruptcies. We have offices throughout Southeastern Wisconsin with skilled attorneys ready to help you eliminate your debt.
Contact us today to schedule a free case evaluation!