If you are determined to keep your house but are overdue on your mortgage payments, you may wish to state Chapter 13 bankruptcy rather than Chapter 7. You cannot make up on the mortgage payments or alternatively preserve your home if you declare for Chapter 7 bankruptcy. The best chapter to file for that would be Chapter 13. Furthermore, some people have too much money and are ineligible for Chapter 7 bankruptcy. You would then require to provide a Chapter 13 reorganization. If you need more information about Chapter 13 bankruptcy, click here.
Why should you file Chapter 13 instead of Chapter 7 bankruptcy?
Chapter 7 and Chapter 13 are the two major bankruptcy filing procedures. The court has authorized both methods as a means for resetting your debt. The type of bankruptcy you file will affect how the court regards your debts and how much you will have to repay. You need to understand debt to figure out how bankruptcy impacts debt.
Your debts do not disappear when you apply for Chapter 13 bankruptcy. The court restructures your loan instead. Restructuring involves the court modifying any original contract terms that gave rise to your debt. For you to be able to pay back most of the amount you owe, the court will often discharge some of the obligations, as in Chapter 7. The obligations you owe, the assets you own, and how much money you will earn will be considered in the court’s calculations.
Chapter 7 initially seems to be the better choice. Paying nothing for debt is unquestionably superior to paying anything if the goal is debt relief. However, there are two major reasons why you might submit a Chapter 13 rather than a Chapter 7:
The government conducts a test for income to make sure you are not exploiting the bankruptcy system before permitting you to file a Chapter 7 case. Considering your assets, income, and debt, the means test calculates how much other income you have. You cannot file for Chapter 7 bankruptcy if you have too much, limiting you to just Chapter 13.
Saving your property
A popular reason for filing for Chapter 13 bankruptcy is when you are overdue on your mortgage but still are determined to keep your house. If you are behind on your payments, you can file for Chapter 7 bankruptcy while continuing to lose your house to foreclosure. The court has permission to reorganize your debt in a Chapter 13 case. During the restructuring terms (often five years), your payments can be reduced, and the loan’s principal amount might change.