When people think of bankruptcy, they often imagine Chapter 7. The process is quick and relatively painless for most.
However, Chapter 13, which reorganizes debts and requires a 3 to 5 year committment, sometimes is preferable.
Why is this? Well, for one, there are certain things that can be done in a Chapter 13 that cannot be done in a Chapter 7 bankruptcy.
For example, in a Chapter 13, a debtor can repay some debts that are otherwise non-dischargeable in a Chapter 7 over a period of time at a reduced interest rate and with no penalties. IRS taxes are an example of this.
Another powerful benefit of Chapter 13 is the ability to strip second mortgages. A debtor in Chapter 13 can get rid of a consensual lien such as a home equity line of credit (HELOC) through a Chapter 13 if certain conditions are met.
Finally, Chapter 13 is useful for people who need to catch up on missed mortgage payments. Under a Chapter 7, a debtor will have very little time to pay the payments he may have missed before the mortgage company tries to foreclose. However, under Chapter 13, those payments can be spread out over several years, and forcing the mortgage company to allow the home-owner to stay in the property.
Contact Robert Chang, Esq. for more information regarding the various forms of bankruptcy, and which one is best for you. Offices are located throughout the Bay Area. 510-388-4866