If you owe a lot of money on various debts, you might reach a point where you cannot afford to pay all your bills. You might start skipping some payments, and you could fall behind on your mortgage payments. If this occurs, you should consider using Chapter 13 bankruptcy for relief. Here are three facts about Chapter 13 to help you understand how this branch works.
1. It Offers a Legal Way to Consolidate Debts
Most people do not view Chapter 13 as a debt consolidation plan, but that is actually what it is. When you use this branch to find relief from your debts, your lawyer helps you create a repayment plan. The repayment plan factors in all your debts and provides you a monthly payment for all of them. In other words, it provides a way to consolidate your debts. If you use Chapter 13, you make your monthly payments to the court, and the court pays your bills. Your monthly payment will be an amount you can afford to pay, and you will still have money left at the end of the month for your other expenses.
2. It Provides a Way Out of Foreclosure
The second fact to know about Chapter 13 is that it offers a way out of foreclosure. If you have even one missed payment on your mortgage, your lender can begin working on foreclosing on the home. There are few ways to stop a foreclosure from going through. The best way is to pay your debts in full. If you cannot do this, you can use Chapter 13. Once you file for Chapter 13, the court issues a letter to your lender that forces them to stop the proceedings.
3. You Might Eliminate a Second Mortgage
The other fact that is good to know is that Chapter 13 can help you if you have a second mortgage on your home. If your home value dropped, leaving you owing more on your home than its current value, the court might agree to strip your second mortgage. While this does not happen in all cases, it can happen if you have an underwater mortgage. A bankruptcy lawyer can help you understand this further.
If you want to consolidate your debts and save your home, using Chapter 13 bankruptcy might be a great option. Are you ready to learn more about this branch of bankruptcy? If so, contact a bankruptcy attorney today.