Submitted by Rachel R on Wed, 11/27/2013 - 11:20pm
How do you know if a Chapter 13 bankruptcy is right for you?
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If your debts have grown increasingly unmanageable and you’re not anticipating this situation will change, you may need to consider a permanent solution to get your finances back on track. Either Chapter 7 or Chapter 13 can help you get a financial fresh start and stop living with the overwhelming stress that too much debt can burden you with. And while Chapter 7 is a clear way to discharge most of your debts, you may not be able to go this route or may not want to.
In order to be eligible for a Chapter 7 bankruptcy, you have to pass a means test. If you don’t pass this test, right away you know that this form of debt relief won’t be an option for you. But even if you do qualify for a Chapter 7, you may prefer to file Chapter 13 and here’s why:
#1 Preserve Secured Loans
If you are behind on your car loan or mortgage and want to try and rehabilitate the loan and keep the property or vehicle, a Chapter 13 is the only way to do this. If you file a Chapter 7 when you are behind on payments, it is unlikely you’ll be able to keep the asset. Another plus to filing a Chapter 13 when you have an auto loan is that you may be able to request a cramdown where the loan value is reduced to the present value of the vehicle. The only caveat is that you have to have taken out the loan 30 months (or more) prior to the bankruptcy filing.
Mortgage underwater? Chapter 13 can help dischare second mortgage!
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#2 Unload Second or Third Mortgages
If you are “upside down” on your first mortgage and have a second or third piled on, Chapter 13 can be a big boon to you. Because of the recent housing market upset, many people find their homes are worth considerably less than they were when they first borrowed to buy them. If your home’s value is less than the primary mortgage balance, this means you are upside down. If this is the case and you have a second (or even a third) mortgage on the home, the judge can discharge this additional debt and leave you with just your main mortgage.
#3 Unsecured Debt Makes Servicing Other Debt Unmanageable
If you have student loans, car loan and/or a mortgage and could afford those if you weren’t also saddled with high credit card balances, medical bills and other unsecured debts, a Chapter 13 can help you get back on solid financial ground. If you can demonstrate to the court that you can pay your non-dischargeable debt if your other debts are vanquished, and your income justifies the move, you can likely get relief of some (if not all) of your unsecured debt by the court. This can enable you to keep you house, keep your car, stay current on your student loans and move on with your life!
If you’re unsure which type of bankruptcy you may qualify for or whether bankruptcy is even a viable option for you, contact the law offices of John T Orcutt for a free consultation. As an expert in North Carolina bankruptcy, we can assess your financial circumstances and recommend the best path for you to regain your financial footing and get a fresh start.
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