Bills can get overwhelming. When things get out of control, and you’re drowning in debt, filing a Chapter 13 bankruptcy can help. But, of course, you’ve worked hard over time to accrue possessions, such as your home. Can you get debt relief through bankruptcy without losing your home? Yes.
What Is Chapter 13 Bankruptcy?
Filing for bankruptcy means that you choose to go through a court proceeding to assist you in dealing with debt. There are different types of bankruptcy. Therefore, it’s important that you work with an attorney who understands the way that this legal process works.
Filing a Chapter 13 bankruptcy is a very common option. Alternatively, this plan is known as the “wage earner’s bankruptcy.” In other words, people filing a Chapter 13 bankruptcy have a steady income. Despite this, they’re unable to pay off their current debts.
The courts will work with you to create a manageable repayment plan. You’ll typically make monthly payments for 3-5 years. Note that during the COVID-19 pandemic, some repayment plans have been extended to 7 years to adjust for widespread changing economic challenges.
After the agreed-upon time, your debt is repaid. Note that this impacts your credit report for years, so it’s very important to consider all of your options. Even if you pay off the debt in three years, the bankruptcy remains on your credit report for 7 years.
Can You Save Your Home During Bankruptcy?
In addition to the impact on your credit report, it’s also critical that you understand how filing a Chapter 13 bankruptcy can impact your assets. Each case is different, so your attorneys will have to explain your particular situation to you. However, generally speaking, filing for bankruptcy means giving up some or all of your assets.
The good news is that with Chapter 13 bankruptcy, you should be able to save your home. You might also be able to save your car. Although additional assets such as jewelry and antiques may have to be forfeited, the court will work with you to save your home and car since these are critical purchases.
Being able to save your home for foreclosure is one of the biggest reasons you might choose Chapter 13 over Chapter 7 or other bankruptcy options. You worked hard to buy your home. Being able to live there provides security. When you start to have trouble making mortgage payments, it can feel terrifying because you know that you might lose your house. Filing a Chapter 13 bankruptcy can help put your mind at ease by making payments more manageable so that you can keep your home.
Important Things to Know
This sounds perfect, right? You restructure your debt, make it more manageable, and save your house. It can definitely be a good option. But you have to go in with open eyes. Therefore, here are some things that you should know:
- If you are unable to make your bankruptcy payments, then you could still lose your home.
- You are significantly more likely to fail the bankruptcy if you don’t have a lawyer. Chapter 13 bankruptcy is complicated. You really do need to hire an attorney to help you with this.
- You can only file for Chapter 13 bankruptcy if your debt is under a certain amount. If you have more than $419,275 in unsecured debt, then you won’t qualify. If you have more than $1,257,850 in secured debt, then you won’t qualify. The government will review those numbers in April 2022, at which time they may change.
Filing for bankruptcy can be a great way to relieve stress from the burden of debt. Moreover, filing a Chapter 13 bankruptcy can help you save your home in the process. But every choice has consequences, so make sure that you understand your options well before proceeding.