Chapter 13, the alter-ego of Chapter 7 bankruptcy. What is it, and why is it becoming one of the most important tools in the financial planning arsenal for more Arizona residents each year?
Chapter 13 is a payment plan bankruptcy, and is being used by more and more people in Arizona as a way to manage their finances.
Instead of having all the bills eliminated shortly after filing for bankruptcy, in Chapter 13 payments are made to a court appointed trustee.
If you think that doesn’t sound like a great idea, you may be surprised to find out the rest of the story.
Why File Chapter 13 … And Why Not.
Most debts that can’t be eliminated in Chapter 7 can be taken care of in a Chapter 13.
Its stops the IRS, the mortgage company, and the bank, as well as many other creditors. Though you will still need to pay certain tax debts in full, it’s without any further interest.
If you’re behind on your mortgage, once you file a Chapter 13 bankruptcy you will start making your regular mortgage payments again. The missed payments are included in the Plan payment, and your house is safe from foreclosure.
Have a car? No problem – you don’t need t worry about the car being taken. It’s being paid in the bankruptcy plan. The other bills are also part of the payment plan. They do not have to be paid in full and will be eliminated, just like in a Chapter 7 case.
Your Plan payment is based on the difference between your income and your living expenses. This is how we do it here in Arizona, but I can’t speak to how trustees in other states handle Plan calculations. This calculation, however, makes Chapter 13 more of a viable option because most consumers in Arizona will find that their overall monthly payments are a lot less.
Which Is The Right Solution For You?
There are really only two ways to find out whether Chapter 13 is the right way for you to go. One way is to, learn all the ins and outs of the bankruptcy code, rules of procedure, and court decisions and make a decision on your own.
The better option is to sit down with an experienced attorney to review your situation. Either way, get the facts before making a decision.
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