When people hear about Chapter 13 bankruptcy (also known as a wage earner’s plan), they are afraid of approaching it as an option because they fear they might lose their home or their personal property. However, much of this fear is based on a misunderstanding of what Chapter 13 bankruptcy is. Here are five things you should know about Chapter 13 bankruptcy and what it can do for you:
- You can avoid foreclosure or eviction
- One of the biggest advantages to seeking a Chapter 13 bankruptcy is that it can protect your home from being foreclosed on, and it can protect you from being evicted from your apartment. This is due to something known as the automatic stay, which (among other things) halts all ongoing foreclosure or eviction proceedings. That way, you can remain in your home until you have finished the bankruptcy process, provided that the Court approves your Chapter 13 plan and you are able to successfully complete it. Such a plan will generally require you to maintain your current mortgage or rent payments in addition to the monthly amount you pay into the plan to cover your other debts.
- You can prevent your property from being seized
- Another one of the benefits of Chapter 13 bankruptcy is that it can prevent your property from being seized by creditors. If you have property that has a lien against it, or property that has been used to secure a debt, a creditor can try to seize it if you fall behind on your payments. However, when you go into bankruptcy, the automatic stay prevents creditors from seizing any of your property without permission of the court. If the Court approves your Chapter 13 plan, lienholders cannot foreclose on your assets unless you fail to make the plan’s required payments.
- You can pay off your debts over time
- Another one of the important aspects of Chapter 13 bankruptcy is that it allows you to restructure your debts so you can repay them over a period of time. Instead of constantly worrying about repaying bills right now, your debt is consolidated so you can repay it over the course of three to five years. This can make your debts more manageable to handle, allowing you to repay them with your normal income in an amount to be approved by the Court.
- You can keep bill collectors off your back
- While not the most legally threatening aspect of struggling with debt, having debt collectors constantly harassing you can be extremely stressful. When you declare Chapter 13 bankruptcy, however, bill collectors can no longer directly contact you to force you to pay regarding your debts that existed at the time of your bankruptcy filing. Instead, they need to deal with the bankruptcy court, relieving you of the constant calls from people looking for you to pay them.
- You can maintain your current standard of living
- One of the most important parts of Chapter 13 bankruptcy is that it doesn’t necessarily need to impact your standard of living at all. You may need to cut back on some expenses, but so long as you keep up with your Court-approved repayment plan, you may be able to get out of debt without changing much about how you live or selling off significant assets. However, to see if this type of bankruptcy is right for you, it is best to consult a bankruptcy lawyer who can advise you on the best course of action for your circumstances.
The Law Offices of Hunziker, Jones & Sweeney are experienced in helping families and individuals deal with the devastating effects of financial distress. The attorneys at the firm understand that financial distress is an extremely emotional and difficult time for anyone to go through. If you are experiencing severe financial distress and may be considering bankruptcy as an option, or want to know more about what a bankruptcy filing may do to help you, call The Law Offices of Hunziker, Jones & Sweeney at (973) 256-0456 or fill out our contact form for a consultation.