Chapter 13 and CollectionsCollections Training Resource
October 23, 2012 — 1,105 views
Chapter 13 and Collections
For debtors who want to make an attempt to repay their debts, but also want collection efforts from creditors to stop, filing for Chapter 13 bankruptcy may be the best option. Homeowners who have gotten behind on mortgage payments often choose this path because it gives them the opportunity to get caught up before their home can be foreclosed on. When a debtor files a Chapter 13, it will immediately put a stop to creditors attempting collection efforts on them. It also allows the debtor options for repayment terms on their debt.
The main reason people choose a Chapter 13 bankruptcy over a Chapter 7, is because with Chapter 13, a homeowner who is facing a foreclosure on their home can stop the legal actions of foreclosure by choosing this option.
Once a Chapter 13 bankruptcy has been filed, a trustee is appointed by the court to work for the homeowner making a special agreement with their mortgage company. From this point on, the homeowner can begin making their monthly payments. They can then add some extra money on the payment until their delinquency is caught up.
Another benefit of filing Chapter 13 bankruptcy is that the debtor has the opportunity to pay off their secured debts over a specified amount of time. The payment plan usually reduces the original amount of the payment so the debtor can afford it. Many people choose Chapter 7 for bankruptcy, but for moral reasons, people who feel obligated to repay their debts choose Chapter 13.
With a Chapter 13 bankruptcy, the debtor often has more room to negotiate with the creditors for repaying their debt on a new schedule. This type of bankruptcy helps those people feel better about themselves, because they are not having their debts discharged, but they are finding a way to eventually have them repaid.
Many people compare a Chapter 13 bankruptcy to a debt consolidation loan. Both the loan consolidation and Chapter 13 bankruptcy allow the debtor to directly pay the trustee their monthly payment. The trustee then makes the agreed upon payments to the creditors on the debtors behalf.
When it comes to getting a mortgage, most companies view a Chapter 13 bankruptcy and debt consolidation loan the same. A nice advantage to filing a Chapter 13 bankruptcy is that the person does not have to have direct contact any longer with the creditor.
Many people choose the Chapter 13 option because they may have loans or credit cards that required a co-signer. With a Chapter 13, the third-party person is protected from creditors coming after them. The creditors can no longer attempt to collect the debt from the debtor or the co-signer.
Bankruptcy offers consumers a way to start over. For those who feel morally obligated to pay their debts, Chapter 13 is the best possible option.