One of the toughest decisions a debtor is forced to make is rather to file a Chapter 13 or Chapter 7 bankruptcy. While there are many benefits to a Chapter 7 bankruptcy, this blog explores the benefits to filing a Chapter 13 bankruptcy in South Carolina bankruptcy districts.
1. You do not loose your assets. In a Chapter 13 bankruptcy, unlike a Chapter 7 where you could lose assets, you will not loose any of your assets to the Chapter 7 Trustee or the Court. This does not mean you can keep your house or car without paying for them. Chapter 13 is a great option for clients that want to be guaranteed prior to filing that they will not loose any assets.
2. Second Mortgages. Chapter 13 has a valuable tool to “value” or “cramdown” second mortgages to pennies on the dollar. Basically you need to show you owe more on your first mortgage than your the value of your property. Determining the value of your property is an issue to discuss with your bankruptcy attorney.
3. IRS tax debt. I love Chapter 13 bankruptcy as an option for my clients who have IRS tax debt. The first reason is that usually the IRS details the debtor’s tax debts in a proof of claim within 15 days of filing the Chapter 13. Second, Chapter 13 allows a debtor to value a secured tax lien down to the value of the debtors combined value of all equity in assets. Third, Chapter 13 bankruptcy allows for the debtor to pay back the IRS over a five year period and often pay pennies on the dollar for income taxes older than three years.
4. Save your home and car. Maybe the most valuable tool of a Chapter 13 bankruptcy is that it can help a person save their home from foreclosure or a their car from repossession. In South Carolina, we have a Chapter 13 plan in many of our districts that allows you to keep your home while paying your mortgage and arrears in a plan over five years. After the five years you go back to your normal mortgage payment. In regards to the car, the plan would allow the person to keep the car while paying the car over five years at a reduced interest rate in most cases. In some cases, the debtor is allowed to pay the value of the car instead of the balance which can save the person thousands of dollars.
If you are considering filing bankruptcy and want to learn about the benefits of a Chapter 13 bankruptcy, please feel free to call me for a free consultation. We have offices in Irmo, Florence, Columbia, and Greenville, South Carolina.