There are many ways filing for bankruptcy can be beneficial for those struggling with overwhelming debt. If a debtor has a steady income, and can possibly pay back a portion of the debt through a legal payment plan, filing for Chapter 13 bankruptcy is the most appropriate choice. Our West Palm Beach bankruptcy attorneys are here to explain how a Chapter 13 bankruptcy offers a few advantages in certain situations over a Chapter 7 bankruptcy.
Halt Mortgage Foreclosures: When a debtor files for a Chapter 13 bankruptcy, an automatic stay goes into effect, immediately stopping any pending mortgage foreclosures. The lender is then required to present a reasonable plan which outlines a certain amount of time (normally between three and five years) to resolve overdue payments. The indebted party is then responsible for two separate payments: the previously-contracted monthly payments, and the newly agreed amount. In order to have a hold placed on mortgage foreclosure, those in debt must provide proof that they have sufficient funds to meet the demands of the new payment plan.
Keep Property Unprotected by a Bankruptcy Exemption: Contrary to what some may believe, not all possessions are required to be surrendered after filing for a Chapter 13 bankruptcy. In fact, filers have the ability to protect certain properties under bankruptcy exemptions. These exempt items must be proven as essential to work or life. The value of all non-exempt items, on the other hand, must be paid over the course of the repayment plan.
The Cramdown Provision:
One of the most commonly-known aspects of a Chapter 13 bankruptcy, the “cramdown” provision, allows defaulters to reduce the amount of debt owed on their secured collateral to the fair market value of the replacement property. That is, if the debtor’s secured collateral is worth $10,000, but $12,000 is owed in loans, there is an option to create a plan to pay back $10,000 while discharging the remaining $2,000. There are a few exceptions to this rule, including the stipulation that the replacement property cannot be bought prior to 30 months before filing for a Chapter 13 bankruptcy. A property’s mortgage does not apply to this provision either.
Talk to an Expert
Filing for bankruptcy can be overwhelming and hard to understand without the help of an expert. Furthermore, many businesses and individuals facing bankruptcy do not understand the complexities of the process, nor do they know how to reap its benefits. Our West Palm Beach bankruptcy attorneys are experts in this area and can provide debtors with an array of options and next steps. To schedule a free consultation today, contact Kelley, Fulton, & Kaplan.