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3 advantages of Chapter 13 bankruptcy

Bankruptcy in general offers you a lot of advantages. For example, once you file, collection actions against you stop immediately due to the automatic stay.

Depending on your financial situation, you may have several bankruptcy options available to you. Chapter 13 is one such option. According to United States Courts, you may qualify for Chapter 13 bankruptcy if you have a regular income but your debts have become more than you can manage. It offers its own unique advantages.

1. Debt reorganization

Chapter 13 reorganizes your debt so you can pay it off over time. It works like a consolidation loan so that you make one monthly payment to your bankruptcy trustee, who distributes it amongst your creditors. In most cases, if any debt remains at the end of your repayment period, it goes through discharge, meaning that you are no longer responsible for it.

2. Reschedule secured debt

A secured debt is one for which you had to put up collateral. Chapter 13 may allow you to extend the payments out over the life of the repayment plan by rescheduling. However, this benefit does not extend to the mortgage on your primary residence.

3. Prevent foreclosure

All forms of bankruptcy put a temporary stop to foreclosure proceedings on a home. However, Chapter 13 gives you the option to cure delinquent mortgage payments over time by making them part of your repayment plan. Once you have paid off the delinquent mortgage payments, there is no need for foreclosure proceedings to continue.

If you are a co-signer on a loan with a person who is filing for bankruptcy, Chapter 13 also has a provision that protects you from liability.

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