With the economy showing no signs of recovery, it is no wonder that so many people are looking into filing bankruptcy to relive their insurmountable debt. The mortgage crisis is one major reason for the current state of the economy and the increased numbers of individuals filing for bankruptcy protection. Subprime loans, which is likely a leading cause of the crisis, were being strongly marketed during the real estate boom over the first half of the decade. These loans always started with low teaser rates to draw people in, and then over time adjusted to unmanageable levels for borrowers who could only qualify for these loans during this time frame. Now when their mortgage adjusts, these same individuals can no longer afford their home. The other problem is that these people cannot even sell their homes as many assumed they could if they were ever in the position of not being able to afford the home any longer. Housing prices have plummeted over the last few years, leaving many people owing more on their home than it is now worth, otherwise known as being upside down on their mortgage. Their once expensive investment has become an albatross around their neck that they can't get away from.
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Filing a Chapter 7 bankruptcy will not only wipe out all unsecured debts, but the individual can give back their home and include the unpaid balance owed in their bankruptcy filing to erase any liability owed on the relinquished property. But what if the individual would like to keep their home? This leads people to wonder: What will Chapter 13 bankruptcy do for me? In a nutshell, Chapter 13 bankruptcy gives the debtor the opportunity, under the protection of the law and guidance of their bankruptcy attorney, to create a plan in which they will repay all or a portion of their debt. Under a Chapter 13 bankruptcy the debtor works closely with their bankruptcy attorney, the court, and the bankruptcy trustee, to come up with a feasible repayment plan that will last anywhere from 3 to 5 years and accommodate the debtor's monthly income. Payments are made until the end of the agreed upon time period, with secured debts being paid on first and unsecured debts getting the remaining funds. Any debts remaining unpaid at the end of that time are discharged. This type of bankruptcy offers advantages over a Chapter 7 by helping the individual avoid foreclosure, offering a lower cost than Chapter 7, remaining on one's credit fewer years, and avoiding the repossession or confiscation and sale of property to pay back the debts.
When it comes to Chapter 13 bankruptcy the main thing that sets it apart from Chapter 7, and the biggest reason people choose this form of bankruptcy filing, is that the debtor will most likely be able to avoid losing their home in a foreclosure. This is made possible due to the specific bankruptcy code provisions that allows for the allotted time period in which the debtor is able to do what is necessary, in compliance with the bankruptcy court, to catch up on back payments and avoid losing their home.
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