Top Five Bankruptcy Provisions
Many individuals report that filing bankruptcy was the best choice they ever made. The Bankruptcy Code provides powerful relief for those buried in debt. Let’s look at the top five provisions in the Bankruptcy Code
Number 5: Redemption/Cram-Down of a Vehicle
A Chapter 7 debtor may redeem a personal vehicle by paying the fair market value of the vehicle, and discharge the remaining vehicle debt. While the redemption process requires a lump sum payment, there are several companies that offer redemption loans. Additionally, Chapter 13 debtors may “cram down” a vehicle loan to the value of the vehicle. The crammed-down debt is then paid off during the Chapter 13 repayment period. While there are restrictions for both the Chapter 7 redemption and Chapter 13 cram-down processes, many debtors are able to take advantage of these powerful provisions and save thousands of dollars.
Number 4: Lien Stripping a Second Mortgage
Lien stripping a junior mortgage during Chapter 13 bankruptcy has become a very popular option for underwater homeowners. Lien stripping is authorized when the value of the home is less than the amount of the senior mortgage(s). For instance, if your home is worth $200,000 and the amount of the first mortgage is $210,000, any junior mortgage can be stripped off in Chapter 13 bankruptcy. The stripped off debt is now considered unsecured and receives the same treatment as your other unsecured creditors.
Number 3: Chapter 13 (or 11) Repayment Plan
The Chapter 13 repayment plan provides time to pay creditors over three to five years. Most Chapter 13 debtors pay little or nothing to unsecured creditors (e.g. credit cards or medical bills), while paying off mortgage arrears, vehicle payments, taxes, and other secured or nondischargeable debts. The Chapter 13 repayment plan is way to restructure your finances under the supervision and protection of the federal bankruptcy court.
Number 2: Automatic Stay / Co-Debtor Stay
The automatic stay is one of the most powerful and far-reaching provisions in the American legal system. The filing of a bankruptcy case triggers this federal legal protection that automatically stops all legal processes and collection actions. State and federal lawsuits must stop, garnishments must stop, repossessions and foreclosures must stop. This stay is an opportunity for the bankruptcy debtor to reorganize finances without the pressures of creditor collections. Non-filing co-debtors are also protected during a Chapter 13 bankruptcy which may last up to five years.
Number One: Bankruptcy Discharge
The bankruptcy discharge is a federal court order prohibiting the collection of pre-bankruptcy debts. Discharged debts are no longer legally enforceable against the debtor. The bankruptcy discharge is the foundation of bankruptcy’s “fresh start.” The discharged debtor can begin the rebuilding process free from the pressures of overwhelming debt. The bankruptcy discharge is permanent and never expires.
Bankruptcy offers many powerful protections tools to reshape your finances. Get the facts today from an experienced attorney and learn how bankruptcy can help your family build a better financial future.