If you are struggling with the decision of whether or not to file for bankruptcy, there are many factors to consider. You will first want to consider alternatives to bankruptcy, such as negotiating with your creditors for smaller payments, or for a settlement amount or working with a debt counseling agency who will help you repay your debts and negotiate on your behalf with your creditors. If your primary reason for considering bankruptcy is to stop harassing phone calls and threatening letters from creditors, you might consider taking advantage of the collection laws—both federal and state—which are in place to protect consumers from threats and harassment by creditors. Chapter 7 bankruptcy is the most appealing to those who have few assets and little to no disposable income, however if you have property you want to keep (beyond the allowable Chapter 7 exemptions), you might want to consider Chapter 13 bankruptcy.
Chapter 13 bankruptcy works well for individuals who are behind on their mortgage or business payments and want to keep their property. Under Chapter 13 bankruptcy, you are allowed to make up your overdue payments over a three-to-five-year time period, reinstating your original mortgage agreement. Those with more valuable homes, or other real estate—which would not be allowed as exemptions under Chapter 7—or those with higher income levels will probably choose Chapter 13 bankruptcy. Further, if you have a significant level of debt which is non-dischargeable under Chapter 7 (certain taxes, student loans, etc.), Chapter 13 will be the better choice.
When You Should File for Chapter 7 Bankruptcy Rather Than Chapter
With the help of an Idaho bankruptcy attorney, you may decide that Chapter 7 bankruptcy is better in your situation. With Chapter 7 bankruptcy, the case is opened and closed within six to eight months, allowing you to emerge debt-free, other than your mortgage, car payments, student loans, child support, and some taxes. While it is possible to lose property in a Chapter 7 bankruptcy filing, it is rare, unless you have a significant amount of assets. Under Chapter 7, you are not required to repay your debts; Chapter 7 works well for those who have significant levels of non-secured debt, such as credit card debt and medical debt.
Advantages to Filing for Chapter 13 Bankruptcy Over Chapter 7 Bankruptcy
There are certain advantages to filing Chapter 13 bankruptcy, as opposed to Chapter 7 bankruptcy (assuming you are even eligible for Chapter 7). These advantages include:
- You will have more time to pay debts which are non-dischargeable under Chapter 7;
- There are more debts under Chapter 13 which are considered dischargeable, such as debt you incurred for luxury items prior to filing Chapter 13;
- Although you won’t have your debts canceled, as in Chapter 7 bankruptcy, you may be able to have the debts reduced under your Chapter 13 repayment plan;
- You can keep all your property if you can afford the payment plan, whether the property is exempt or non-exempt;
- If you will pay your debts in full under your Chapter 13 agreement, any co-signers to those debts are also immune from creditors;
- You are immediately granted protection from potential wage garnishment and any collection efforts on the part of creditors as soon as you file for Chapter 13;
- You can keep your home out of foreclosure so long as you make your agreed-upon monthly payments;
- You are allowed, under Chapter 13 bankruptcy, to separate your creditors by “class.” This allows you treat different debts differently, sending different percentages for your payment of the debt to different creditors. You are also able to treat debts which have a co-signer differently than debts which are solely your own.
Disadvantages to Filing for Chapter 13 Bankruptcy in the State of Idaho
There are certain disadvantages to filing for Chapter 13 as well, such as:
- If you are a stockbroker or commodity broker, you are not allowed to file for Chapter 13;
- Chapter 13 filing is more complicated than Chapter 7 filing;
- Because Chapter 13 is more complex, the legal fees are higher, and
- Because you will be in a payment plan for three to five years, your disposable income will be tied up.
How Does Chapter 13 Bankruptcy Work?
If you decide to file for Chapter 13, you will work with your Boise bankruptcy attorney to propose a 3-5-year repayment plan, which will pay all or a significant part of your debt over that period of time. Your future income is designated to pay this debt, and many people who are behind on their mortgage, car payment, etc., find Chapter 13 a viable alternative to losing those assets. The amount you will be required to pay to your creditors will be determined by your monthly disposable income, according to the Idaho Means Test.
Chapter 13 bankruptcy is useful in dealing with non-dischargeable debts such as most taxes and student loans. Chapter 13 bankruptcy is also a useful way to restructure some short-term secured debts with high interest rates, paying lower rates. Once you have figured out a workable repayment plan, the court must approve your plan, and, obviously, you will have to have a steady income which is sufficient to comfortably repay your monthly obligations.
When you file your Chapter 13 petition with the bankruptcy court, you will be issued an automatic stay, which protect you from debt collection activities such as wage garnishments, debt collection phone calls, lawsuits and foreclosure proceedings. You will also be required to supply information about your financial affairs, your regular living expenses, your income and your debts. Compiling all this information in the manner required can be extremely complex, which makes it a good idea to have a Boise bankruptcy attorney assist you through the process.
Filing for Chapter 13 bankruptcy can be a challenge, and one that can be a daunting task. Not only are you required to determine whether you qualify for Chapter 13 bankruptcy, you must also meet all the deadlines associated with Chapter 13 bankruptcy and correctly fill out all the necessary paperwork. To ensure your rights and your future are properly protected, contact an experienced Boise Chapter 13 bankruptcy attorney.