Will Chapter 13 Benefit Me?
Filing a Chapter 13 bankruptcy offers many benefits to a debtor who is overwhelmed with debt, but who owns assets that they do not want to lose, including a home. Some of the major benefits include:
Keeping All Your Assets
One of the most powerful benefits of filing a Chapter 13 is the fact that you are allowed to retain all your assets, including your home and personal property. This also includes any assets that are unexempted, which would have been seized by the Trustee under a Chapter 7.
Saving Your Home
If you owe mortgage arrears on your home, and are facing foreclosure, filing a Chapter 13 bankruptcy can stop the foreclosure, and allow you to catch up on your mortgage arrears pursuant to a monthly payment plan over a 3 to 5 year period.
If you have more than one mortgage and are facing foreclosure because you cannot meet your monthly payments, and the value of your home is less than or equal to your first mortgage, you can file a motion to change the additional mortgages into unsecured debts. The benefit of this is that you do not have to pay unsecured debts in full under Chapter 13. Therefore, Chapter 13 can reduce your monthly mortgage expense.
No Interest Accrued
You will not accrue any interest on your debts during the duration of your Chapter 13 payment plan period. For those with extensive debts, this is a powerful consideration that could save the debtor thousands of dollars.
Paying Less on Your Auto Loan
If your car is reliable and you want to retain it, but it is worth far less than what you owe, you can file a Chapter 13 and take advantage of the CramDown option that may allow you to repay the car’s replacement value rather than the full amount you owe on the auto loan contract.
If you have a codebtor who you would like to protect while you file bankruptcy, a Chapter 13’s automatic stay also protects codebtors from liability. This means that when you file a Chapter 13, creditors cannot collect from you or your codebtors.
Paying off nondischargeable debts
Some debts are not dischargeable or are extremely hard to discharge. For example, student loans and tax obligations, etc. Filing a Chapter 13 bankruptcy allows you to pay off such debts over time without interest accruing.
Debtors can use Chapter 13 to sue harassing creditors that have violate state or federal anti-harassment laws.