Before you choose to file for bankruptcy, it’s a good idea to talk to a Maryland bankruptcy attorney who can explain how the laws that apply to each type of debt relief apply to your situation—and how each possible outcome could affect you. For many people, a wage earner’s plan is the best way to go.
Advantages of Chapter 13 Bankruptcy
It’s important to know that no two cases are alike. What works best for you may not be a good solution to someone else (and vice-versa). With that said, though, you may find that the advantages of a Chapter 13 bankruptcy outweigh those of other types of debt relief.
You Don’t Have to Liquidate Your Assets With Chapter 13 Bankruptcy
When you file for Chapter 13 bankruptcy, you’re not required to liquidate your assets as you are when you file under Chapter 7 of the U.S. Bankruptcy Code.
Chapter 13 May Enable You to Stop Foreclosure
Many people are able to stop foreclosure by using this type of debt relief because it doesn’t require you to give up any of your property during the process. You’re allowed to make up mortgage arrears (those are payments you didn’t make when they were due) by incorporating them into your repayment plan.
(See “How to Stop Foreclosure With Chapter 13” for more information.)
You Can Most Likely Keep Your Car and Other Property
The premise of a Chapter 13 bankruptcy is that you’ll repay your creditors—you’ll just do it on different terms. The point is that you’ll still be making payments without forfeiting your belongings. (In a Chapter 7 bankruptcy, the trustee can sell all your nonexempt property to pay your creditors.)
It May Be Easier to Pass Eligibility Requirements for Chapter 13
If your disposable income isn’t low enough to pass the Chapter 7 Means Test, you won’t be eligible for that type of debt relief. Conversely, you may be eligible for Chapter 13 provided that you don’t have more than $394,725 in unsecured debt or more than $1,184,200 in secured debt.
Secured Debt vs. Unsecured Debt
A secured debt is a debt in which you gave up an asset as collateral with a promise to pay it. An unsecured debt is one that the lender didn’t require anything but your word that you’d repay.
Car loans and mortgages are typically secured debts; the bank will come take your car or house if you don’t pay. Most credit cards are unsecured debts; the lenders don’t have anything to take from you if you don’t make your payments.
Chapter 13 Can Buy You Time
With this type of debt relief, you can keep your property while catching up on missed mortgage payments, car payments, and nondischargeable priority debt payments.
How Long Does This Type of Bankruptcy Take?
Chapter 13 involves a repayment plan that spans between 3 and 5 years. Before you begin making payments, you’ll have to have your plan approved by the bankruptcy court.
(See “How Long Does the Chapter 13 Discharge Process Take?” to learn more.)
Do You Need to Talk to a Maryland Chapter 13 Lawyer?
If you’re in financial trouble and think that this type of debt relief could work for you, call us at 301-933-2595. If it’s easier, get in touch with us online for a free Chapter 13 bankruptcy consultation. We’ve helped many people in Rockville and the surrounding communities—including NoVa and D.C.—and we can help you, too.