When it comes to filing bankruptcy most people think of chapter 7. Because of the real estate meltdown in 2007 more and more debtors are considering filing a Chapter 13 bankruptcy. Many individuals consider filing bankruptcy because of foreclosure. A Chapter 7 bankruptcy will only temporarily stop a foreclosure, unless the creditor is willing to negotiate something. With a large amount of foreclosures looming, Chapter 13 bankruptcy has moved to front and center.
A Chapter 13 is to foreclosures like bacon is to eggs. They complement each other perfectly.
When a debtor files Chapter 13 bankruptcy, they will be able to negotiate a feasible payment plan with their creditors. The debtor will be able to keep all their property while being able to catch up on back payments over the 3 to 5 year Chapter 13 payment plan. For someone who is employed and facing foreclosure this seems like a no-brainer. Chapter 13 bankruptcy offers the debtor a mass amount of flexibility, in case your situation changes. If the debtor’s employment changes and they can no longer afford the previous payment amount, they can call their bankruptcy attorney to submit a motion to reduce the payments. If for some reason, like unemployment, they are no longer able to continue on with the payment plan they also can convert it to a Chapter 7 bankruptcy.
As long as the debtor doesn’t miss any payments, the bankruptcy will continue on without a dismissal. If the debtor fails to make payments without contacting their bankruptcy attorney and the trustee, the bankruptcy filing will be dismissed in the debtor will be open game for the creditors to come after them.
In today’s real estate market, Chapter 13 has given the power back to the debtor to negotiate with the mortgage lender for a loan modification of sorts. If the value of the property has dropped below the amount owed, the debtor can remove the second and third trust deeds off of the property making them unsecured. Debts in a Chapter 13 bankruptcy are paid by priority, with secured a top and unsecured being the last to be paid.
To get the ins and outs of filing Chapter 13 consult a bankruptcy attorney.
Article source: By Lindadale, http://lindadale.hubpages.com
