How do I love thee, Chapter 13?
Let me count the ways.
Hang on, because it’s a long list. Thirteen reasons Chapter 13 rocks.
I love Chapter 13 because:
1. Debtors keep control of their assets. They run their businesses. There is no trustee tasked to sell their assets.
2. Repayment to creditors can be little or even nothing. It depends on the debtor’s income and the value of their assets.
3. Chapter 13 plans can be changed during the case. If income falls or is temporarily interrupted, the plan can be changed to accommodate the change.
4. The case can be freely dismissed. You can get out of bankruptcy if you want, unlike Chapter 7 .
5. The automatic stay protects the debtor for the 3 -5 years of the plan. No foreclosures, no repossessions, no levies.
6. Mortgage defaults can be cured over as long as five years.
7. The interest rate on car loans can be reduced to today’s market rate.
8. Mortgage liens that are totally underwater can be eliminated forever in 13.
9. The IRS has to go along with the repayment terms in your plan, without interest.
10. Tax penalties are dischargeable, even when the tax is recent.
11. Debts to former spouses, other than support, can be discharged.
12. Tax liens greater than the value of the debtor’s assets at filing are eliminated.
13. Attorneys fees for the case can be paid after filing.
More advantages to Chapter 13
When you file Chapter 13, you are eligible to file another Chapter 13 case, if you need to, far more quickly than if you had filed a Chapter 7.
In fact, you are eligible to file a second Chapter 13 after two years from the filing of your first case. (But you can’t have two cases active at once.)
Your Chapter 13 filing generally drops off your credit report three years earlier than if you had filed a Chapter 7 bankruptcy. It’s gone two years after the Chapter 13 discharge in a five year plan.
Unlike debt settlement arrangements, your repayment plan is enforced by a federal judge. All creditors are required to go along. No creditor can elect not to be involved and opt out of the plan. Whether a creditor files a claim or not, the creditor’s claim is likely toast at the end of the case.
And there’s no income tax on the debt that’s discharged.
Chapter 13 can be a powerful and affordable tool for getting back on your financial feet.
