A Guide To Understand Chapter 13
If you are concerned that your mounting debts will cause you to lose key assets, such as your family home, one viable solution may be to file for Chapter 13. To discover the process of filing for Chapter 13 and its regulations, simply continue reading. Especially if you're still uncertain about whether it's in your best interests to file for Chapter 13.
Filing For Bankruptcy In The US
There are currently two ways that you can file for personal bankruptcy in the United States, you can either file for bankruptcy by filing Chapter 7 or Chapter 13. Regardless of which you opt for, your unsecured debts which include any credit card debt which you may have accumulated as well as your medical bills will be wiped. Which means that you will not have to worry about paying them back. Basically, any debts which are not backed by collateral will be conveniently wiped, which will allow you to regain control of your financial future.
Key Differences Between Chapter 7 & Chapter 13
The majority of individuals who opt to file for Chapter 13 over 7, are concerned about losing their homes through bankruptcy as if you file for Chapter 7, your house may be seized in order to pay for some of your debts. So if you want to retain your family home, it's possible to do so by filing for Chapter 13. In this scenario, you won't be required to pay back your unsecured debts but you will be required to continue making your mortgage repayments in the 3-5 years following your bankruptcy.
Do keep in mind that it should be a lot easier to afford your mortgage repayments if you no longer have to worry about paying back your unsecured debts such as credit card payments and medical bills.
Another difference between Chapter 7 and Chapter 13, is that if you file for Chapter 7 your bankruptcy will show up on your credit report and will negatively impact your credit score for a period of up to 10 years. Whereas if you opt for Chapter 13 instead, your bankruptcy will only show up on your credit report for 7 years.
How To Keep Your Home Safe
It's worth noting that you will have exactly 3-5 years to catch up your mortgage repayments in order to protect your home from foreclosure. If you file for Chapter 13, you'll need to keep up with a plan which proves to the court how you will be able to pay off your mortgage arrears within a 5 year period. As well as paying for backdated mortgage repayments you will also be required to pay all of your future mortgage repayments.
Do keep in mind that if you don't catch up with your mortgage arrears within 5 years, you will not under any circumstances be given an extension and your home may be seized by the bank to pay for your outstanding debt.
The Role Of Your Appointed Trustee
You will not be required to handle the processing of your required mortgage repayments yourself, instead, your appointed trustee will make your scheduled mortgage repayments on your behalf. So you won't have to worry about missing any scheduled mortgage repayments and violating the regulations of your bankruptcy which could put your home in jeopardy.
Unfortunately one of the downsides of using a trustee to make your mortgage repayments and any other loan repayments that you're required to make, is that you will be required to pay your trustee a fee for their services. In fact, your appointed trustee will actually receive a set percentage of all of the funds that are paid to your creditors or bank as part of your bankruptcy plan.
Managing Your Funds After You Have Filed For Bankruptcy
While your trustee will take many of your financial responsibilities for you, in the 3-5 years that it takes you to catch up on your loan repayments, you will still be allowed to save money in a personal bank account. You can even open up a new bank account such as a checking account or a savings account after you've filed for bankruptcy but you must seek court approval first.
Traveling Outside Of The United States
You may be surprised to hear that your ability to travel overseas will not be greatly impacted by filing for bankruptcy. As long as you are able to afford your monthly loan repayments and are able to attend any meetings that you have been summoned to attend, you will be able to leave the country as many times as you would like. As long as you can pay for your travels in full. So if you are a keen traveler and are concerned about how filing for bankruptcy will influence your future travel plans, there is no need to worry.
Starting A New Business After Filing For Bankruptcy
You are also permitted to launch a business after you file for bankruptcy. This is due to the fact that the courts are well aware that individuals who have filed for bankruptcy still need to make a living and to be able to pay for their outstanding secured debts such as their mortgages. However, it could be difficult to acquire capital to start a new business, if your credit score has been negatively impacted by filing for Chapter 13. Although you may be able to acquire the necessary capital to start a new business, without taking out a business loan.
So if you have made the difficult decision to file for personal bankruptcy and you wish to keep your home safe, it's well worth discussing Chapter 13 and its benefits further with an experienced lawyer. Who will be able to guide you through the process of filing for Chapter 13. If however, you are not trying to protect a valuable asset such as a house, you may want to further discuss with your lawyer whether filing for Chapter 7 or Chapter 13 is in your best interests.