Advantages of a Filing A Chapter 13 Bankruptcy
However, there are some great advantages of filing a Chapter 13 bankruptcy.
Below the experts at ZocLaw.com explore some of these advantages.
Protecting your home from foreclosure
One of the major advantages of filing a Chapter 13 bankruptcy While filing a Chapter 13 bankruptcy will not provide you with a free home, it will allow you to determine the terms of repayment to the mortgage company. Under Chapter 13, previous due amounts are broken up into small manageable amounts and paid back over the duration of the Chapter 13 repayment plan. This allows you to prevent foreclosure on your home provided you are able to maintain the normal monthly mortgage payments from the date your case is filed.
Obtain a mortgage modification
The bankruptcy code allows for second and third mortgages to be modified in a Chapter 13 bankruptcy. This process is called lien stripping. The code does not allow for a first mortgage to be modified however. If you are having serious difficulties in repaying the balance due on your first mortgage, additional mortgage liens are considered under secured and qualify to be stripped by the bankruptcy court. Upon stripping of the mortgage, you pay the loan at pennies on the dollar with the rest of your unsecured debt.
Your car payments may be reduced
The principle of lien stripping also applies to car loans i.e the modification of secured debt to meet the value of collateral. If you have issues with repaying the balance on your car loan, you have the option in a Chapter 13 bankruptcy to “cram down” the loan to match the value of your car. However, this option is not available to debtors who purchased their car in the last 910 days.
Assistance with IRS
One of the most attractive advantages of filing a Chapter 13 bankruptcy is that is can help with unpaid taxes. A fact that is not well-known is that a Chapter 13 bankruptcy may assist you with IRS problems. There are numerous benefits that Chapter 13 provides to debtors dealing with IRS debts. Similar to a credit card or a medical bill, some taxes may be discharged. The taxes that have to be fully paid, are paid more economically in a Chapter 13 because the IRS is not paid interest on the tax. Penalties are treated like unsecured debt even though the tax from which the penalties arise must be paid as a priority claim. Tax liens may be crammed down, and eliminated from property, often by paying much less than the amount of the lien, however, this depends on how much equity there is in the property.
Well the experts and ZocLaw.com hope that the above discussion about the advantages of filing a Chapter 13 bankruptcy will encourage you to consider filing a Chapter13 bankruptcy (if you qualify, of course) and not be reluctant to do so because of the misconceptions surrounding this Chapter.