Bankruptcy can help to resolve a wide range of financial problems due to the special rules that apply in the bankruptcy courts. This is why so many people can gain permanent relief from their debts and other forms of financial struggles by filing for bankruptcy. However, the bankruptcy chapter that will be best for you will depend on your individual circumstances.
Chapter 13 bankruptcy can be beneficial for those facing a risk of foreclosure for many reasons. It is arguably better to file for Chapter 13 bankruptcy than Chapter 7 bankruptcy if you want to keep your home since Chapter 7 bankruptcy requires the liquidation of assets. The following are reasons why a Chapter 13 bankruptcy could help you to avoid foreclosure.
An automatic stay is initiated
When a debtor takes action to file for Chapter 13 bankruptcy, an automatic stay is put into place. This means that your creditors can no longer move forward with any debt collection proceedings, including foreclosure. Therefore, by simply filing for bankruptcy, you will have already temporarily paused the foreclosure process.
You can reorganize your debts
Chapter 13 bankruptcy allows you to reorganize your debts into a repayment plan that is realistic based on your income. This repayment plan will take between three and five years to complete, after which you should be able to benefit from a debt discharge.
Filing for Chapter 13 bankruptcy can be a great solution for those dealing with significant financial issues that means they are unable to pay their mortgage. You should consider a variety of options before you commit to filing for Chapter 13 bankruptcy. Therefore, it is a good idea to conduct thorough research before taking action.