Filing for bankruptcy is an important decision, one that should only be taken after careful consideration. In many cases bankruptcy is the only option left. It is true that after you file for bankruptcy you have to deal with many changes. However, not all of these changes are negative. Those who are in a very tight financial situation will definitely benefit from bankruptcy, especially Chapter 13. Bankruptcy is meant to give you a fresh start. If you are serious about paying your debts you would come out winning in the end.
When compared to Chapter 7, Chapter 13 bankruptcy offers many more advantages to debtors. Given here are some of the benefits of both these types of bankruptcies.
Fresh Start
One of the main advantages of bankruptcy is that it lets a debtor start afresh. This is true for Chapter 7 as well as Chapter 13 bankruptcy. You get to start with a clean slate. You get a chance to have your debts discharged. It is true that your credit will be ruined for some time to come, but if you put in efforts, you can always rebuild that as well.
Bankruptcy teaches debtors the importance of financial discipline. You realize why you got into trouble in the first place and when you start afresh you are able to avoid those mistakes. So bankruptcy makes you a more disciplined spender.
Stop Collection Calls
Being in debt definitely means that you are behind in your payments. This also means that everyday you are dealing with many annoying collection calls. The creditors do not understand your problems. All they want is their money from you. Filing for Chapter 7 or Chapter 13 bankruptcy puts a stop to these pesky collection calls.
After you file for bankruptcy, your creditors have to stop all their collection efforts. If you are behind on your mortgage payments, Chapter 13 bankruptcy offers you a chance to catch up on your payments. People who are facing foreclosure often choose the option of filing for Chapter 13. This gives them a chance to restructure their debts and come up with a repayment plan that suits that present financial condition.
Stops Foreclosure Proceedings
Furthermore, Chapter 13 petition halts the foreclosure proceedings. The court appoints a trustee, who makes provisions with the mortgage company on your behalf. You are thereafter required to make the monthly mortgage payments, plus an extra amount, till you catch up with your late payments.
Room To Negotiate With Creditors
Chapter 13 petition gives the debtor room to negotiate with his/her creditors. Since the creditors know that you are willing to pay a certain part of your debt, they are more than happy to negotiate with you. If you have a good lawyer on your side, you are able to work out a payment plan that works in your favor.
Another advantage of Chapter 13 bankruptcy is that you do not have to deal with the creditors directly. The trustee deals with the creditors on your behalf. This saves you a lot of headache. Furthermore, Chapter 13 bankruptcy does not damage your image as badly as a Chapter 7 bankruptcy. You know that you did whatever you could to repay as much of your debt. Thus at the end of Chapter 13 bankruptcy you do not feel guilty.
Protects Third Party
Debtors who have loans that required co-signers benefit from Chapter 13 bankruptcy, the most. Chapter 13 bankruptcy protects the third party from the creditors. In other words, after you file for Chapter 13, your creditors cannot pursue you or the co-signers for collecting debt. Furthermore, the third party is also protected from any legal recourse. The creditors have to deal with the trustee if they have any concerns.
Bankruptcy gives you a chance to start fresh; however, it is upto you to make the most of this opportunity.