How to Repay Secured Loans via Chapter 13 Bankruptcy

Chapter 13 Bankruptcy – A Way to Stop the Foreclosure Process

Bankruptcy, particularly, Chapter 13 Bankruptcy (reorganization), is a court process that places you under the security of the bankruptcy court so you can reorganize and repay your debts. When you make the filing, an automatic stay is issued which prevents your creditors from collecting on your outstanding balances without the court’s approval. Therefore, using this measure to get out of underneath the burden of debt can also give you some time to pay off secured loans, such as a mortgage, even if your home is currently in foreclosure.

You Must Submit a Proposal for Repayment to the Bankruptcy Court in order to File Chapter 13 Bankruptcy (Reorganization)

In addition, filing Chapter 13 Bankruptcy can serve to prevent the loss of an asset, such as your home or car, if you immediately begin to pay on the secured loans or make payments to catch up on the a loan amounts that are outlined in your repayment plan. For the aforementioned repayment to go into effect, you will be required to submit a proposal and detailed budget to the bankruptcy judge. So, in order for the paperwork to be authorized, you have to be careful about adding any items in your financial plan that could be construed as excessive by the court’s standards.

Wages can be Garnished for a Long as Five Years

While some debts are erased, others will usually have to be repaid, such as secured loans for autos and homes. Once the proposal and budget for repayment is approved and processed by the bankruptcy court, you will typically have your wages garnished during the repayment period – a span of time that can last up to five years. Therefore, after filing Chapter 13 Bankruptcy (reorganization), you must remit any missed payments on your secured loans for your home or cars if you want to ensure that you won’t lose the assets. Chapter 13 Bankruptcy usually requires that you pay the difference between the value of exempt items and the amount of equity your home. Also, in order to be eligible for the filing, you must receive a regular income in the form of a salary, social security benefits, and child care or alimony support.

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