One option you might be hesitant to consider if you are drowning in debt is bankruptcy. You might love the idea of filing for Chapter 7 bankruptcy and ending up debt-free. However, depending on your financial circumstances, Chapter 13 might be a better option.
Many Philadelphia residents do not realize how advantageous filing for Chapter 13 bankruptcy can be. Not everyone qualifies for Chapter 7 bankruptcy. Though they have fallen behind on their car notes, mortgage payments and credit card bills, their income might exceed the financial limits for Chapter 7 bankruptcy. Take some time to consider the following benefits for Chapter 13 before you finalize your decision on which type of bankruptcy to file:
Stops creditor collection activities
The date that you file for bankruptcy is the date your creditors must cease their collection activities. That means they cannot contact you by mail, phone or email. Your creditors cannot sue you for payment or garnish your bank accounts and wages. Chapter 13 repayment plans are often for three to five years. All collection activity can resume after you complete the plan.
Prevents foreclosure and repossession
If you are in danger of your lender repossessing your vehicle or foreclosing on your home, you might be surprised to learn that Chapter 13 can allow you to keep your property. You can even restructure your payments so they are lower and more affordable, making it easier for you to bring them current.
Discharges nonpriority debts
Chapter 7 bankruptcy allows people to discharge certain debts. What you might not realize is Chapter 13 bankruptcy also allows filers to discharge credit card bills, personal loans, some tax obligations, medical bills and other nonpriority debts. Chapter 13 bankruptcy restructures your debts into a three- to five-year repayment plan. Balances that remain after you complete the plan are discharged.
Choosing the right type of bankruptcy can help you to get the fresh financial start you want. Research the disadvantages of Chapter 7 and Chapter 13, and you should also carefully consider your situation, income and financial habits. Chapter 13 bankruptcy is ideal for those who not qualify for Chapter 7 and want to keep their home and car while repaying their debts.