To decide whether you should declare bankruptcy is a tricky decision. The decision affects not only your future credit but also your self-image and reputation. In some cases, filing for bankruptcy gives you the peace of mind in the short run by putting the calls and letters on a temporary hold.
Other than this, you also need to decide on the right type of bankruptcy for your financial needs.
Let’s talk about Chapter 13 bankruptcy:
What Is Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is also known as a wage earner’s plan. This plan helps individuals with regular income to systematically repay their debts. The plan also allows the debtors to draft a repayment plan and propose it to the creditor. The plan enlists details of installments and their total duration. In some cases, the court might approve a longer period.
As a rule of thumb, if the debtor’s monthly income exceeds the approved state median, the plan should ideally go on for five years. In this case, the creditors can’t make any payment collection efforts beyond these five years.
What Are the Benefits of Chapter 13 Bankruptcy?
One of the most significant benefits of Chapter 13 bankruptcy is that it helps homeowners stop foreclosure proceedings. They can also deal with delinquent mortgage payments over their time to retain their homes. However, the applicant must make all the mortgage payments that are due during the Chapter 13 plan. Under the plan, you can also reschedule your secured debts and extend them throughout the plan. This could help you significantly lower the payments.
Another provision of the Chapter 13 plan protects third parties and consigners liable with you on the ‘consumer debts.’ It does so by acting as a consolidation loan under which you can make the payments to a trustee, who would them disburse these to all the creditors. In short, you won’t have to deal with your creditor directly.
Are You Eligible for Chapter 13 Protection?
Under the law, any individual is eligible for chapter 13 protection if they have unsecured debts lower than $394,725 and secured debt lower than $1,184,200. The law applies all applicants, whether they’re self-employed or work for an unincorporated business. However, the law doesn’t allow a partnership or a corporation to be a Chapter 13 debtor.
On the other hand, you’re not eligible for the plan if:
- Your prior bankruptcy petition was dismissed during the preceding 180 days as a result of your failure to comply with the court’s orders.
- You haven’t attended a credit counseling session from an approved credit counseling agency 180 days before the filing.
We don’t want you to lose ownership of your house! At Recovering All Investments, we are helping homeowners in Texas deal with mortgage foreclosures and credit repair. Get in touch.