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10 Benefits of a Chapter 13 Bankruptcy


A Chapter 13 Bankruptcy case is a powerful tool to help you get out of debt. A Chapter 13 can often be a much better choice than a Chapter 7 Bankruptcy. A lot of our clients are wary of filing a Chapter 13 because it requires monthly payments. These payments may be very beneficial to your finaical health. Here is a short list of benefits a Chapter 13 Bankruptcy can have for Missouri clients:

  1. When you file for Chapter 13, the court will typically stop home foreclosure proceedings during the bankruptcy process, even if they have already started. This may allow you to keep your house while you sort out your mortgage debt in bankruptcy.

  2. Most creditors are prohibited from contacting you when you file bankruptcy because of the automatic stay, which kicks in when you file for bankruptcy. Therefore, you will have no direct contact with creditors while under chapter 13 protection.

  3. You reorganize your debts by create a new plan to pay creditors off, potentially allowing you more time to meet your financial obligations. The bottom line is that you can be completely out of debt in 3-5 years, which may be impossible without bankruptcy.

  4. Debts that cannot be discharged in a Chapter 7, such as taxes, can be paid off through the Chapter 13 repayment plan over time. This potentially stops garnishments and levies by the IRS.

  5. Creditors will not bother any co-debtors you have on personal loans. After filing for Chapter 7 bankruptcy, your creditors will go after the co-debtor for payment of the debts. If you file for Chapter 13 bankruptcy, the creditor will not pursue your co-signers as long as you keep up with your repayment plan.

  6. Chapter 13 allows individuals to reschedule secured debts, such as car or furniture payments, and extend them over the life of the chapter 13 plan. Doing this may lower the payments and/or interest rates for these debts.

  7. Chapter 13 allows you to make one monthly payment to a bankruptcy trustee that covers all of your debts. Your payment is determined by your budget, which you put together with your bankruptcy attorney for approval by the Bankruptcy Court. Your budget allows you to pay what you can afford and can be much better than going at things alone.

  8. Since you are paying what you can afford, you may not be able to pay 100% of your debt over 3-5 years. In the majority of Chapter 13 bankruptcy cases people do not pay back 100%. In fact, people often only payback a small fraction of what is initially owed. The amount of debt you do not pay back over the course of your Chapter 13 Plan is handled the same way it would be in a Chapter 7 – your dischargeable debts are wiped-out, so you receive a fresh start!

  9. A process called lien stripping may remove second or third mortgages from your home, so you only have your first mortgage. In order to qualify for stripping a lien off of your home, the value of your home must be equal to or less than the amount owed on your first mortgage on the day your bankruptcy case is filed. The careful calculation of the value of your home before your case is filed should be done by an attorney experienced with bankruptcy.

  10. A Chapter 13 bankruptcy remains on your report for seven years from the date it is filed, compared to a Chapter 7 bankruptcy, which remains for 10 years. It will be listed in the public records section of the report.

Since 1997, the St. Louis attorneys at The Law Office of Tracy A. Brown, P.C., have helped thousands in Saint Louis stop creditors from harassing, garnishing, and threatening clients through Chapter 7 and Chapter 13 bankruptcy filings that alleviate excessive debt. Contact us today to free your future from your past.

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