All kinds of people, including those who make decent money and have substantial assets, can find themselves in a financially complicated situation. Whether you missed work due to an illness or just overextend yourself trying to keep up with the Joneses, it doesn’t take long for that to start ruining your life.
By the time you’re struggling to make mortgage payments or falling behind on credit cards, you may need to start considering options for debt relief. The good news is that contrary to what many people think, you may be able to save some or all of your assets during bankruptcy. For those whose income exceeds the state median or who have sizable assets, it may be possible to seek relief under Chapter 13 bankruptcy.
Chapter 13 restructures your debt
Many people don’t understand the difference between Chapter 13 and Chapter 7 bankruptcy. Chapter 7 is the quick discharge bankruptcy that most people think of when they think of bankruptcy protections. It allows those with only some assets or lower income to quickly seek relief from unsecured debts, like medical debts or credit cards.
Chapter 13 bankruptcy, on the other hand, allows somebody with debt issues to restructure that debt and make monthly payments more manageable. Those payments last a specified number of months, and then there will be a discharge of unsecured debts that remain. Unlike Chapter 7, which has a limit to both the assets you can retain and the income your household may have, Chapter 13 protections are available to most anyone.
How Chapter 13 can help you protect your house
Maybe you bought a property in an area where the values of homes have since declined. Perhaps your income has dropped, and your monthly mortgage payment is no longer feasible. It may even be that you purchased on an adjustable rate mortgage and now payments are too high for you to manage.
Regardless of what is causing your concern about losing your home, Chapter 13 bankruptcy may be able to help. When you file for bankruptcy relief, there will be an immediate stay on debt collection activity. This could temporarily halt foreclosure proceedings.
Additionally, you will have the opportunity to negotiate more reasonable payments with creditors, ranging from credit card companies to your mortgage company. Provided that you are able to maintain the new payment amounts in a timely manner during your repayment, Chapter 13 bankruptcy can help you get out of a mortgage late payment whole.
Simply walking away from your home could mean losing tens or hundreds of thousands of dollars in equity. Restructuring your mortgage or adjusting your other financial obligations to free up more money can help you take control of your financial situation again.