Chapter 13 Bankruptcy can Provide Time to Pay Off Your Debts
Qualification Requirements for Chapter 13
In order to qualify for a Chapter 13 bankruptcy you must be a wage-earner. You can file for Chapter 13 bankruptcy only if you have a relatively steady source of income.
A Chapter 13 bankruptcy establishes a plan for fixed payments over a number of years. This plan effectively refinances your debt and allows you to meet your living expenses before paying off creditors.
The fixed payments are calculated to pay off a percentage of your pre-bankruptcy debt, including back house payments at an affordable rate. In order to keep your house, you need to keep up with your regular house payments while you make your plan payments.
Length of Chapter 13 Plan
The bankruptcy court may allow you three to five years to catch up on your debt, depending on your income level and other factors. For the plan to work, payments to the Chapter 13 Trustee must be kept current or the court protection will be withdrawn and the lender can resume foreclosure proceedings.
There are a number of other advantages of Chapter 13 bankruptcy.
Unfortunately, over two-thirds of Chapter 13 filers cannot follow their plans and make their scheduled payments. A missed plan payment might follow an unexpected event, such as a divorce or serious illness.
Which is better for your credit, foreclosure or bankruptcy?
Surprisingly, a foreclosure appearing on your credit report may be worse than a Chapter 13 filing. After successfully completing a Chapter 13 plan, you might be in the position to refinance your home or sell and purchase a new home.
If for whatever reason you just want to postpone the foreclosure of your home rather than save it, you can consider a Chapter 7
A bankruptcy is not a do it yourself project. You should find a bankruptcy attorney who can develop a plan and file the proper papers. Many caveats and special rules apply to bankruptcy and only an experienced attorney can advise the proper course of action. The cost of an attorney is minimal compared to the cost of losing your home.