Benefits of Chapter 13 Foreclosure Over Chapter 7

Benefits of Chapter 13 Foreclosure Over Chapter 7

Anyone deciding to file for bankruptcy will quickly find out that there are various types that can be filed. For an individual, Chapter 7 is, by far, the most popular filing in the country.

There is a good reason why Chapter 7 is the most popular type of bankruptcy filed. And that is because it provides them with the opportunity to virtually get rid of all of their debts and start their financial life anew with almost a blank slate. Unfortunately, this type of bankruptcy has certain financial limits which you must meet in order to file. If you do not meet the financial criteria, you will most like be forced to file under Chapter 13 which, in reality, is more of a reorganization plan than a plan that actually discharges your debt.

On the other hand, other consumers may feel that they would be better off filing under Chapter 13. Particularly if they have a number of assets. Its primary benefit is that it allows you to keep all of your possessions while you are under the bankruptcy protection. And there are other benefits as well.

First of all, Although Chapter 13 will not discharge all of your debts, it can reduce the amount of debt that you owe on some of them. For instance, assume that in 2009 you purchased a new car, a Nissan Sentra, for $20,000. But, a year later the car is only worth $13,000 even though you still owe $18,000 on it.

If you file for a Chapter 13 bankruptcy, you could possibly have your debt amount reduced to $13,000, i.e. the real resale value of the automobile at the time of your filing. In addition, you could have the terms of the payment renegotiated to make it easier for you to pay. That's because the primary aim of Chapter 13 is to keep you solvent so that you have the ability to pay off your creditors under the re-negotiated terms.

Cars are but one example. And the extremely nice thing about this kind of bankruptcy filing is that it lets you reduce the debt that you owe on a great number of items whose value is no longer worth as much as when you bought them. So, in effect, you could have your overall debt reduced by thousands of dollars.

This kind of filing helps you in an additional way as well. It will provide you with additional time in which to make up the payments you have missed to a creditor. So, for example, if you had purchased some furniture sets for assorted rooms in your house and for which you are now behind on your payments, this can help you out. The bankruptcy re-organization can take the sum total of your late payments and spread them out over the coming 3 or 5 years, making it much easier to pay them. And making it easier to pay your debts while at the same time maintaining your solvency is really what Chapter 13 is all about.

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