Many people associate bankruptcy with hardship and financial ruin. While bankruptcy can be a complicated and stressful process, it’s actually an opportunity for you to regain financial security. Chapter 13 bankruptcy is a common solution for people in need of debt relief. It can be a versatile answer to your financial problems.
Here are just three benefits that showcase the advantages of filing for Chapter 13.
1. Create a structured repayment plan
When you file for Chapter 13 bankruptcy, it’s more of a reorganization of your finances than an elimination of your debt. It sets up a structured repayment plan that allows you to make monthly payments over a set period. With a plan such as this in place, it ensures that you can manage your car or income tax payments. It also makes medical bills and credit card debt more manageable.
2. Avoid home foreclosure
One common fear that many people share when filing for bankruptcy is the fear of losing their homes. Chapter 13 bankruptcy makes it possible for married couples and individuals alike to avoid home foreclosure.
Instead of using your home as a liquidation asset to pay off debt, filing Chapter 13 places an automatic stay on the foreclosure process. This prevents creditors from pursuing collection of missed home payments. It gives you the time and space to create a repayment plan that works with your monthly budget so you can pay back missed mortgage payments in small, manageable sums.
3. Lessen the impact on credit reports
Unfortunately, no matter how successful the bankruptcy process is, your credit score will reflect your bankruptcy. This can make it difficult for you to obtain new credit cards or loans.
However, a Chapter 13 bankruptcy will only remain on your credit report for seven years. While this number may seem significant, Chapter 7 bankruptcy remains on your report for 10 years. The impact that Chapter 13 has on your credit is significantly less than that of Chapter 7.
Chapter 13’s flexibility makes it a viable solution for debt relief. If you qualify for Chapter 13 bankruptcy, it can be an effective method that will help you move toward a debt-free future.