Chapter 13 Benefits
Contrary to many beliefs, filing a Chapter 13 bankruptcy has many advantages over a Chapter 7 bankruptcy. After reviewing your situation, our Colorado attorney’s can walk you through which chapter would be the best to file here in Colorado.
Strip off Your Second Mortgage
In some circumstances, you can get rid of your second mortgage or your Home Equity Line of Credit (HELOC) by filing bankruptcy here in Colorado , which will help you make smaller payments on the house in the future. This is one of the few benefits of the new bankruptcy law that a highly trained Colorado attorney can help you with.
Save House or Car when you are behind on Payments
You can cure mortgage or car arrears in a Chapter 13 plan and bring yourself current during the next 36-60 months rather than need to do so immediately to save your house from foreclosure or repossession.
Longer time to Reorganize your Affairs
The automatic stay in Chapter 13 is of longer duration than the Chapter 7 stay and provides you with a greater opportunity to reorganize your affairs.
The Chapter 13 Trustee v. Chapter 7 Trustee
You will deal with a Colorado Chapter 13 Trustee who is not incentivized by trying to liquidate your assets and not a Colorado Chapter 7 Trustee who gets paid by the amount of non-exempt they can sell. Thus, historically, there is less scrutiny and you stay in control.
Keep Assets that are not exempt in a Chapter 7 Bankruptcy
If you want to keep a car, boat or house that is not exempt under Colorado Bankruptcy Law, then you can file a Colorado Chapter 13 and avoid all of the Chapter 7 problems with the Colorado Chapter 7 Trustee.
You do not have to pay back anything to unsecured creditors
You can now do a Chapter 13 with a “0” percent pay-back to the unsecured creditors in some circumstances. As a result, the Chapter 13 plan can be used to pay the Colorado Chapter 13 Trustee, the legal fees and the secured debts for the property the debtor really wants to keep. This is the same that you would probably spend in a Chapter 7 bankruptcy.
You can Convert your Chapter 13 to a Chapter 7 Bankruptcy
In most cases, you can convert a Chapter 13 case to Chapter 7 at anytime and receive your discharge.
You do not need to sign a Reaffirmation Agreement
Because your secured property will be provided for in the Chapter 13, you do not need to sign a reaffirmation agreement. Reaffirmation agreements are only used in a Chapter 7 bankruptcy.
Less Scrutiny by the Department of Justice
You avoid less scrutiny by the United States Trustee because you are doing exactly what Congress said should be done-file for Chapter 13. The Executive Office of the United States Trustee has indicated that they do not monitor Chapter 13 cases but leave this solely to the discretion of the Chapter 13 Trustees.
You can modify your Chapter 13 plan at anytime
You retain the ability to modify the plan as necessary to abandon secured collateral and reduce the plan payments if appropriate. Chapter 13 plans are flexible based on your current circumstances.
Repay Back Taxes
Older taxes that were timely filed are dischargeable in a 13. The Colorado Chapter 13 also provides the debtor with the ability to repay non-dischargeable taxes. Once you file your bankruptcy with the bankruptcy court, these taxes cannot increase and are just chiseled down over the course of your bankruptcy. This does not occur in a Chapter 7 bankruptcy.
Repay Child Support
Like taxes, Domestic Support Obligations can be provided for and brought current in the Chapter 13 bankruptcy. Some Chapter 7 Trustees will pursue such claims as a source of fees and commissions.
Penalties associated with Willful and Malicious Injury
Willful and malicious injury to property is not discharged in a Chapter 7 bankruptcy but is subject to discharge in a Chapter 13 bankruptcy. Willful and malicious injury to a person is not dischargeable in a 13, but only if the state court action has gone to judgment.
Divorce Settlement Obligations are Dischargeable
Non-Domestic Support Obligations are still dischargeable in a 13. Under the new law, they are not dischargeable under a Chapter 7 Bankruptcy. Thus, anything in your separation agreement that does not relate to alimony or child support are dischargeable only in a Chapter 13 bankruptcy.
You can continue to repay your pension loans. The loans are no longer debts and are not even subject to the automatic stay. And, the payments are not part of disposable income in a Chapter 13.