There are several different ways to obtain bankruptcy protection in Kentucky under the bankruptcy code. For most consumers, Chapter 7 and Chapter 13 offer the most help in getting them out from under intolerable debt conditions. While Chapter 7 is often preferred because of its ability to quickly wipe away debt and give consumers a fresh start, Chapter 13 offers many distinct advantages as well. Depending upon your financial resources, assets and financial goals, Chapter 13 may be the best choice to meet your needs. For consumers in Warren County and across western Kentucky, Lanna Martin Kilgore, PLLC in Bowling Green can help you determine whether Chapter 13 is right for you.
Chapter 13 provides for an adjustment and reorganization of your debts. In Chapter 13, you develop a repayment plan that allows you to comfortably pay off your existing debts from available income over a three or five-year period. All of your debts are brought together under one plan, and your creditors are required to accept the terms of an approved plan. Some of your debts may be adjusted under the plan, so that you do not have to pay off the entire amount.
Chapter 13 may sound like debt consolidation, but there are important differences between Chapter 13 and a debt consolidation outside of bankruptcy. Any savings that occur from a debt consolidation are treated as taxable income, but that is not the case for an adjustment of debts under Chapter 13. The payoff of your debts typically goes quicker with Chapter 13 as well. Debt consolidation tends to string out the repayment over a longer period, so there is no actual savings in the long run, while in Chapter 13 your bills may actually be lowered. Finally, a Chapter 13 can protect your home, car and other valuable property, while a debt consolidation may require you to put up property as collateral or security, and you can lose those assets if you fail to stick to the terms of the consolidation plan.
Chapter 13 has advantages over Chapter 7 as well. Both Chapter 7 and Chapter 13 invoke the automatic stay which puts a stop to collection efforts by your creditors; in Chapter 13, this automatic stay also keeps creditors from going after any co-signers on a loan, which can be very important to protect friends and family members. Also, an economic means test is not required for Chapter eligibility as it is for Chapter 7. Finally, Chapter 13 does not require any liquidation of assets, so you don’t have to worry about whether or not your property is exempt. If you have a steady income and want to make sure you keep your property, a Chapter 13 wage earner’s plan may be the solution to your financial troubles.
Chapter 13 can be especially helpful for homeowners who are facing foreclosure because they cannot keep up with their monthly mortgage payment. If you are behind in your payments and cannot make them up, the bank can quickly come in and foreclose, meaning they sell the house out from under you and keep the proceeds. What’s worse, if the proceeds from the sale don’t cover the entire mortgage balance, the bank can still come after you for the remaining amount!
In a Chapter 13 bankruptcy, you can take any mortgage payments that you missed and roll them into your Chapter 13 plan. As long as you stick to your plan and stay current on your mortgage payments going forward, the bank no longer has any grounds to foreclose.
At Lanna Martin Kilgore, PLLC, we take the time to sit down with you and help you determine whether bankruptcy is right for you and which type of bankruptcy will best serve your interests. Located in Bowling Green, we have over 20 years of experience serving the people of Warren County and throughout the jurisdiction of the U.S. Bankruptcy Court for the Western District of Kentucky. Call today at (270) 846-3700 or contact us online to schedule a consultation with a skilled and knowledgeable bankruptcy lawyer.