Chapter 13 bankruptcy Repayment plan

When you find yourself knee-deep in debt, you will have to find a way in which you can become debt free. There are infact various ways in which you can become free of your financial obligations like credit card debt consolidation, debt settlement, self-repayment plan or debt management. However, if all of these fail, you will have to opt for the last resort that may be able to swipe out all of your debt problems. This is filing a bankruptcy. As a commoner, you can file bankruptcy either under chapter 7 or chapter 13.

Chapter 13 – More of a repayment plan

Chapter 13 is known as the repayment or reorganization plan. In this type of bankruptcy, you are not required to sell off your assets. When you file chapter 13 bankruptcy, a significant portion of your outstanding debt gets eliminated and you are required to make the payments on the rest amount to your creditors as per the repayment plan.

bankruptcy

The repayment plan and the amount of your debt that gets eliminated through chapter 13 bankruptcy will depend on your income and expenditures. Almost all of the income that remains after paying off all of the necessities will have to be forwarded to your creditors.

However, one of greatest advantage of chapter 13 bankruptcy and any other bankruptcy is that it puts a stop to the interest rate from increasing and the debt amount from accruing. Another advantage of chapter 13 bankruptcy is that, if you are able go on making the payments as per the repayment plan throughout the life of the plan, the remaining debt gets discharged.

However, another thing that can affect the amount that you will have to pay is the value of the assets that you own like your real estate (if any). You may have to pay the amount which your creditors would have got if you were to file chapter 7 bankruptcy and if your real estate would have been sold off.

Your tax liabilities and other payments like the insurance payments in relation to the assets that you own can also affect the amount that you will have to pay through the repayment plan. Through chapter 13 bankruptcy you may be able to pay off the debts within 36 to 60 months depending on the amount that you are able to forward to your creditors.

Many people are of the opinion that chapter 13 bankruptcy is better than credit card debt consolidation as it puts a hold on the interest rate and the debt amounts from increasing.

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Does bankruptcy have adverse impact on your mortgage lending?

It is a well known fact that filing of bankruptcy is the least thing one would like to do. Nobody will be inclined to do it. However, when you are faced with some serious financial problems and you have no other alternative, what can you do? The only way out for you will be to file bankruptcy. Even here, you will have to assess the situation carefully. And if you have any mortgage at present, you should take that into account and the impact bankruptcy will have on it. For your information, a couple of options are available pertaining to bankruptcy. One option is Chapter 7 bankruptcy and the other option is Chapter 13 bankruptcy.

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Options of bankruptcy

In Chapter 7 bankruptcy, known also as total bankruptcy, your entire debts, or at least a major portion of your debts will be written off. And you will be asked to dispose some of your assets so that you can make the repayment in respect of some dues. This bankruptcy is also known as ‘straight bankruptcy’ or ‘liquidation bankruptcy.’ Under this, you will be exempted from repayment of debts, of course with a few exceptions. Chapter 13 bankruptcy, on the other hand, is a ‘repayment plan.’ Here, the bankruptcy court will have the power to take a decision as to how your dues are to be cleared. Some of the dues will be settled in full, and the balance debts may be settled in part or may be written off in full.

Two categories – Exempted and Non – Exempted

In this bankruptcy, the whole of your properties will come under two categories – exempted and non-exempted. Whatever properties that fall under exempted category, you may keep them with you during the whole period of bankruptcy proceedings . As far as the properties that come under non-exempted category, you have only two options – either you surrender these properties or pay cash equivalent to the value of the properties as part of the bankruptcy. May be, in a few exceptional cases, you will be allowed to keep possession of properties coming under non-exempted category; it depends on how the bankruptcy trustees decide. To know what will be the impact of chapter7 bankruptcy on your mortgage, you should have knowledge about a ‘loan’ and a ‘lien.’

It is known fact that a mortgage company provides the fund for buying a property. The company will, naturally, have a lien on the property, which means the company has a hold on the property till such time the loan is discharged. When you file bankruptcy under chapter 7, the mortgage company, because of the right it has over the party, will choose to take any action in the matter. However, under chapter 13 bankruptcy, there is no chance of your losing the property. But then you will be asked to submit a detailed plan as to how you will repay the loan. An automatic stay, issued by the bankruptcy court, will prohibit the lender from taking recovery proceedings.

The moment you file the petition for bankruptcy, under Chapter 7, the lenders will not be inclined to consider giving any fresh loan to you, at least for a minimum period of two years. If, however, any lender comes forward to offer you a loan within two years from your filing bankruptcy, it is better you get full details of the offer and go through them carefully. You should consider the total cost involved in the loan offered. If, however, you have filed bankruptcy under Chapter 13, you can apply for and get a fresh loan after one year from the discharge of your bankruptcy petition. All said, before filing bankruptcy petition, you would do well to have frank and detailed discussion with a professional.

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Why You Should Not File for Bankruptcy in Your 20s

The worst part of young age is that at this time you will probably have numerous of loans and such people find it tempting to file for bankruptcy. However, bankruptcy does not solve your problem rather it increases the same.

Here are some worst effects of filing for bankruptcy in your 20s.

It Won’t Wipe the Slate Clean

According to the recent survey it has been noticed that one out of every five people are carrying student loans for bad credit debt on themselves. This is because now-a-days graduates are not getting jobs because of the bad economic condition and those who are getting jobs are not getting an adequate salary because of the bad market conditions and hence, they are not able to pay off their student loan debt.

Bankruptcy

 

For the people facing such situations, filing for bankruptcy to get free from it might seem like an option but it is not a good choice in the long run. If the reason behind getting into debt is because of the bad economic condition then there is a legal solution available for them to cope up with debt, which is that the lender will garnish 15% of your retirement benefit which will be given to you by your employer.

You’re Neglecting the Real Issue

Most people in the age of 20s get their first job, in which they get a nominal salary and then they realize how difficult it is to earn money and managing their finances within their salary. As when you start your job, then you have to think for your better future and for it you have to take many things to make your life and future secure. The very first thing for which you have to make a proper plan is to save money for buying a house as you can’t spend your whole life in a rented apartment. You have to save some money for purchasing a house. After that you need to take some insurance policies like health insurance, retirement policy to make your life secure. As health expenses are very high which can not be managed by your income if you get any serious disease. It is important to take a health insurance plan following with that a retirement plan in which you will have enough money which you’ll get after retirement as there will be no income after retirement by which you can sustain your life.

You will also have to save money for unexpected expenses or emergencies like repair of cars, or for buying any house appliances. And you have to save money for your family’s future like your wife and children as you have to pay for their studies, college fees and their basic expenses. You have to plan your whole life at the age of 20 and make your plans accordingly that what are the requirements that you will need to manage and live your life peacefully. If you don’t manage your finance at the very beginning of your life, then you will face many difficulties in future which will affect your life badly.

You Could Hurt Your Job Prospects

The worst effect of filing a bankruptcy is that it will be mentioned in your credit report for the next 7 to 10 years. If a bankruptcy is filed and gets mentioned in your credit report then you will face difficulties in getting jobs or switching from your previous job to another job. Although there are no such mandatory requirements for employers to check your credit score before giving you a job, but it comes under the formality of checking the whole background in which your credit score will also be checked and an employer might deny giving you a job because of your bad credit score. This is because your credit score is the indicator which decides that how good you are in managing your finances and for employer it will be risky you giving job because when you can’t even manage your finances properly then he will assume that you may not even manage your work properly.

You Could Become Homeless

Another ill effect of filing for bankruptcy is that you may end up losing your home. And you cannot even buy another house for at least next 7 to 10 years because bankruptcy will be mentioned in your credit report and your credit score will be so low that you will not qualify for loans with no credit check anywhere. You will not even have any valuable asset which you can pledge as collateral against the loan amount. Even you will face difficulties in getting house for rent as your credit score is also checked by landlords before giving home on rent as to see that you are not a risky tenant.

Credit Will Be More Expensive and Limited

When you file for bankruptcy, then it will be mentioned in your credit report and your credit score will be lowered down by which if you apply for small finances, then also you will have to face problem in getting approved for a loan. And if in case your loan gets approved, then also you will be charged with a very high interest rate as there’s a risk involved for lenders for losing money.

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