If you are really considering filing a bankruptcy, there are two kinds of bankruptcy proceedings that you need to know about – Chapter-7 and Chapter-13 bankruptcy.
If you are falling behind on the payments of your loan and if you a have a reliable income source, the best option for you is Chapter-13. Well, this proceeding has been designed to extend your time of payment to about three to five years without risking the loss of your personal properties.
All you need to do is design a repayment plan that shall incorporate all the debts you have fallen behind to pay such as car loans and mortgages and then pay a portion of your income to cover those debts in a time frame of three to five years. If this idea sounds good to you and if you have the eligibility to file such a bankruptcy, you can approach an affordable bankruptcy attorney San Diego, who would be more than willing to back you up.
Here are some related aspects to be considered before filing a Chapter-13 bankruptcy:
- Effects on your outstanding bills and personal properties:
The priority debts such as taxes must be paid fully through your repayment plan, though if the creditor agrees some portion could be paid at the end of the plan period.
You would surely be interested to know how chapter-13 bankruptcy filings affect your personal properties, loans and mortgages. Well, as mentioned above, you need to prepare a repayment plan that will incorporate the outstanding bills and you will not need to give up the property as in case of Chapter-7 bankruptcy.
However, if you are willing to surrender your house, your car, you can do so though it isn’t compulsory. In most of the cases, all you need to do is regularly pay a portion of your income to cover car loans and mortgages through your repayment plan.
In some places, you are even allowed to pay the mortgages and car loans outside the plan.
- Unsecured debts:
The bills such as credit card bills, medical bills are termed as unsecured bills. Under Chapter-13 bankruptcy proceedings these unsecured debts aren’t required to be paid in full. They are lumped together and based on the amount of disposable income left after you pay all your priority debts, the creditors of unsecured debt receive a certain percentage (0%-100%) of the amount they are owed to. In the majority of cases, since the disposable income is quite inadequate for full payment, debtors pay only small percentage of the unsecured debt.
There are certain factors that could limit you from enjoying the benefits of Chapter-13 bankruptcy. For instance, if your income is way too low or if your debt is way too high, you are ineligible to file under chapter-13 bankruptcy.
- How does it end?
At the end of the period considering that you have followed the repayment plan, you will have paid off all the outstanding priority debts, mortgages and car loans. In case of the unsecured debt, at the end of bankruptcy, the creditors only receive a certain portion of the disposable income. In the end, you are free from all the outstanding bills.
Thus, depending upon the situation under consideration and depending upon your eligibility, you need to determine which bankruptcy filing is most suitable for you.