Knowing When to File Chapter 13 Bankruptcy
You should consider filing for Chapter 13 bankruptcy as soon as you realize your financial burden is too much to handle without help. There is no need to wait until your home is in foreclosure or your car is being repossessed.
Chapter 13 is called debt reorganization because it takes all of your existing unsecured debts and rolls them into one low payment. By lowering all of these bills, the hope is that you can afford to keep paying your mortgage and remain in your home.
In order to understand why you should file under Chapter 13 sooner rather than later, it is important to separate myth from fact.
There are many misconceptions about bankruptcy. Many people think of bankruptcy as an absolute last resort. They wrongly believe that bankruptcy will ruin your life, ruin your credit and force you to give up most of your possessions.
Let’s address these myths one at a time:
- Bankruptcy will not ruin your life. If you file for debt reorganization (Chapter 13), you will be paying only your mortgage and one monthly payment, which is lower than your current payments. You won’t have much disposable income, but if you are filing, that money was likely already going to bills anyway. Your life probably won’t change much, except that debt collectors will stop calling and you will be able to stop worrying. After three to five years, the plan is over and many of your debts will be discharged.
- While bankruptcy can affect your credit, so can being late on your bills and behind on your mortgage. When you make your monthly payments under Chapter 13, lenders see that you are taking your responsibilities seriously and fixing your financial problems. You may not get approved for a credit card the day you file, but your credit can eventually recover.
- Chapter 13 bankruptcy does not require you to give up any possessions. While Chapter 7 filings may require the liquidation of some assets, Chapter 13 is designed to let you keep everything you own.
Bankruptcy is not a last resort. In fact, filing early is often a wise move. As soon as you realize that you are not going to be able to make all your payments, you should take action. This will help you avoid late fees, interest rate hikes and foreclosure actions. It will also help prevent your credit from being effected by overdue bills.
Before you make any decisions, you should speak to a professional. The bankruptcy attorneys at DebtStoppers in Chicago are focused on helping families get a new financial start. To schedule a free one-on-one debt analysis, call us today at 312-913-0630 or contact us online.