Chapter 13 Foreclosure Vs Chapter 7
There who choose to file bankruptcy for whatever reason, you will discover that there are various types that you can file. For an individual, Chapter 7 is, by far, the most popular filing in the U.S.
Most people who file for bankruptcy choose Chapter 7 because it gives them the chance basically eliminate 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.
For some people, however, Chapter 13 is actually the best way to file – especially if you 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.
For one, even though Chapter 13 won’t discharge all of your debts, it can decrease the amount that you owe on some of them. For example, say that in 2009 you bought 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. Under Chapter 13, you could have the amount you owe reduced to $13,000 – the actual value of the car at the time you file. 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.
But automobiles are simply an example. The really nice thing about this type of bankruptcy filing is that it allows you to reduce the amount of money you owe on all sorts 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.
Another way that this type of filing helps is that it gives you time to make up payments that you may have missed on a debt. Say, for instance, that you purchased a number of furniture sets for various rooms in your home for which are late in making a number of payments. 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.
