Should You File Chapter 13 Bankruptcy To Get Out Of Debt?

Debt can be a huge burden if you are struggling to keep up with payments. You might be considering bankruptcy. However, many business owners have assets that they want to hold on to. Unlike a chapter 7 bankruptcy process, the chapter 13 filing allows you to keep your assets and make monthly payments over the course of 36-60 months. Depending on your situation, we will cover when it may be worthwhile to file for chapter 13 bankruptcy.

You Can Keep Your Business Running

In a chapter 13 bankruptcy filing, you can keep doing business as normal. Since it requires a continuous income, you can make many payments rather than giving up assets. Your bankruptcy trustee would collect payments. This allows you to keep your properties and equipment that are essential to doing business. Of course, you can benefit from a chapter 13 filing if you have assets that you need to continue to generate revenues. It can be worthwhile to keep certain assets that are above market value or can appreciate in the long term as well.

Avoid Foreclosure On Your Property

In addition to keeping assets, chapter 13 bankruptcy can prevent you from losing property that is currently in foreclosure. In business, it can be hard to keep up with mortgage payments during slow periods. If this happens to you, a chapter 13 could stop the foreclosure process from moving forward. This would give you time to work out a repayment plan without the additional money stress and catch up so that you don’t lose the property. Moreover, it would be worth it when business picks up and you are able to make all the payments on time too.

Receive Time To Pay Non-Dischargeable Debts

You might have to pay debts that are not dischargeable, but don’t have the money to do so. A chapter 13 bankruptcy could give you the time and the plan to get current with payments again. These types of debt include child support and tax debt. Unfortunately, tax debt is not dischargeable, so you could use a chapter 13 bankruptcy to get on a proper payment plan. Many times, business owners can fall behind in their tax payments while they are running a business. This would be a situation where a chapter 13 filing could help your financial situation overall.

You Have Enough Funds To Pay Your Debts

The key difference to filing a chapter 13 bankruptcy is your ability to pay back the debts on a monthly schedule. You should ensure that you actually have the funds to make that monthly payment. Otherwise, the filling could fail if you do not make the payments consistently. Your income should be consistent enough to keep up with those payments over the three to five year period. If you are going through a rough patch and expect things to get better, than a chapter 13 bankruptcy filing could be worth it to overcome unfortunate financial circumstances.

Unsecured Debt Can Get Discharged

Depending on the value of your assets and disposable income, you could end up paying less of your unsecured debt back to creditors. This could provide a significant financial relief if you were struggling to keep up with payments to begin with. At the minimum, creditors receive a similar amount to a chapter 7 filing. However, it could still be significantly less than the total amount of what you would have had to repay including interest and penalties. Based on how much you can actually afford to pay back, chapter 13 bankruptcy lawyers could help alleviate part of the unsecured debt liabilities.

A chapter 13 bankruptcy filing is worth it for certain individuals. You have to be eligible for the filing. If it works for you, the filing could help you keep your business assets. It can also stop your property from being foreclosed on. If you need some time to repay secured or priority debts, it could help you get back on track when you find yourself in debt. More so, if you have enough funds to pay your debts, you could repay everything over a longer time period. Finally, a chapter 13 bankruptcy could discharge certain unsecured debt depending on your disposable income and asset holdings. Compared to a chapter 7, this filing can help you keep assets that you do not want to give up. With the right attorney, you could make a chapter 13 filing worth it for your finances in the long term.

Image: StevePB

 

 

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