What are the advantages of Chapter 13 bankruptcy?
When struggling with overwhelming debt, people in New Jersey may consider filing for Chapter 13 bankruptcy, a debt relief option with several benefits.
The average total household debt in the U.S. is $135,529, according to a CNBC report. In order to regain control of their finances, people in New Jersey may consider filing for Chapter 13 bankruptcy. Understanding the benefits of this debt relief option may help people determine if it is right for their situations.
Avoid liquidating property
Unlike other bankruptcy options, Chapter 13 does not require people to liquidate their assets to pay back what they owe. Rather, they may pay back all or some of their debts over three to five years through a repayment plan. Filers may keep any property they are paying on and may be able to keep the collateral for secured debts under certain circumstances.
In some ways, Chapter 13 repayment plans similarities with debt consolidation plans. With the exception of mortgages, filing for Chapter 13 bankruptcy allows people to restructure the payment of their debts and spread them out over the duration of their plans. Depending on several factors, this may lead to reduced payment amounts each month for filers. Further, since they make one lump sum payment to their trustee each month, people who seek this type of assistance do not have to keep up or have contact with each of their creditors.
Stop collection efforts
Upon the filing of a Chapter 13 bankruptcy petition, an automatic stay is put into effect. This action bars creditors from taking further action toward collecting debts. Holding their creditors and debt collectors at bay may allow people to focus on getting back on track financially, without having to face additional issues.
Save a home
If their financial struggles cause them to become delinquent on their mortgages, their lenders may foreclose on people’s homes. As is the case with other collection efforts, foreclosure proceedings are put on hold when people file their Chapter 13 petitions. Provided they continue to make their regular payments and are able to get caught up on their arrears through their repayment plans, people who seek this type of bankruptcy assistance may be able to keep their homes.
Sometimes, people need help from a friend, family member, business associate or someone else to obtain a loan. If those people then file for some types of bankruptcy, these cosigners may be on the hook for the debt. Since they pay off certain debts during a Chapter 13 bankruptcy, however, filers’ cosigners in these situations may not be financially liable for the remaining balance. Additionally, there is a special provision for consumer debts in Chapter 13 bankruptcies, which may also protect cosigners.
Working with an attorney
Dealing with overwhelming debt may be challenging enough for people and families in New Jersey. Navigating the legalities of obtaining bankruptcy assistance may further complicate the situation. Therefore, those who are struggling financially may consider consulting with an attorney to discuss their options. A lawyer may explain their obligations and guide them through the process.