Reorganization under Chapter 13 works as a repayment plan over a three to five year period depending on the debtor's income. Chapter 13 is the perfect solution for debtors with large tax obligations or mortgage arrears. In cases of impending foreclosures, homeowners are allowed to pay off mortgage arrears over the duration of the Chapter 13 plan. If the value of the home is below that of the first mortgage on the property, the debtor may be able to discharge a second mortgage or any other junior liens against the home.
Unlike debt consolidation, the monthly payment in chapter 13 is based on the household income rather than the total amount of the debt.
In Chapter 7, you may discharge most of your unsecured debts with the exception of student loans, child support, and taxes in the last three years. Upon the filing of a bankruptcy petition, all collection efforts are stayed, including wage garnishments, foreclosures, and ongoing lawsuits.
Financed homes and vehicles may be retained in Chapter 7 for as long as the debtors remain current on payments. In some cases, auto loan payments may be reduced by lowering the APR through a reaffirmation.
In the alternative, debtors may surrender a financed vehicle in order to purchase a different one after the bankruptcy filling.
Common misconceptions about bankruptcy may be preventing you from taking charge of your finances and obtaining a fresh start today. However, filing for bankruptcy could eliminate most of your unsecured debts and actually improve your credit score faster than other forms of debt resolution.
In most cases, debtors experience a credit score increase of 50 to 100 points in the first year following their bankruptcy discharge. There is no minimum debt requirement to file for bankruptcy and most individuals qualify if their income is below the median state income for the size of their household.
Call today for a free consultation