Chapter 13 Bankruptcy is an effective tool for debtors to rework their debts and pay them off over a stipulated period of time without the accrued interest, based on the individual’s financial outlook into the future.
Chapter 13 Bankruptcy for Texas home owners facing Foreclosure
When it comes to Foreclosures, homeowners can file for Chapter 13 Bankruptcy to stop foreclosures. This allows them an opportunity to restructure their mortgage and other pending debts based on court approval which will ultimately reduce the burden on their monthly repayments and improve the overall financial structure. This is a very important option for all home owners to consider if they wish to keep possession of their homes after missing out on their mortgage payments. This is subject to their ability to pay the monthly installments to their assigned trustee once the debts are restructured. It also helps homeowners who cannot take the burden of mortgage and wish to give up their property. Doing so, the debtors can hedge themselves from having to replay the deficient amount (along with interest) by paying off just the principle, in case the sale of the house falls short of the mortgage value.
Reasons for filing under Chapter 13 Bankruptcy
There are various reasons debtors file for Chapter 13 Bankruptcy. For example, if the individual wants to keep the assets, payments for which they have fallen short. This could include a home or an auto loan etc. Or if the individual has to discharge tax debts which are heavy, or if the court decides to rule in favor of bankruptcy filing to help creditors resolve their debts. One may also file for bankruptcy to discharge student loans, protect co-signer of loans etc.
Option of Debt Consolidation
Debt Consolidation is an option that some individuals choose to exercise to work out mutually agreeable repayment of loan terms with the lender which involves lower monthly installment payments or lower interest rates. At times however, if the debt amount is huge, it is better to file for bankruptcy as it saves you from paying back the 100% amount of debt as required by entering a debt consolidation plan. Also, doing so, the interest on debt amount is completely waived and you only pay back part of the principle. You also have the flexibility to choose the tenure of repayment based on your individual situation. Also the long term negative effect on your credit rating is highly minimized.
Option of Debt Settlement
The concept of Debt Settlement involves a total break on repayment of debt to the creditors and saving that amount so that your Debt Settlement company can directly settle with creditors by offering 50% or more of the principal debt amount as a lump-sum. The success of this method depends on the amount of debt you owe the creditors. While considering this option, it is important to consider that you will be paying hefty service charges to your Debt Settlement company as well which will be settled before your debts are paid out.
Alternatively, Chapter 13 Bankruptcy is highly result focused and successfully plans to repay your debts in a more cost-effective and predictable fashion over a period of 3-5 years. The unpaid debts are usually simply discharged, and the debtor does not have to worry about paying them at all. Most of us are weary of filing for bankruptcy. However, in a given situation, it is important to consider all facts and learn that Chapter 13 Bankruptcy filing is a way to help debtors and creditors so that both their interests are served without burdening the debtor unnecessarily.