Advantages and Disadvantages of Chapter 13 Bankruptcy in Nevada
Making the decision to declare bankruptcy in Nevada is a tough one that should never be taken lightly. It has an impact on your future credit and self-image. However, once the collection calls and letters stop, it will significantly improve your immediate quality of life. In addition to considering whether to file, you should consider which type of bankruptcy is best for you (typically either Chapter 7, Chapter 11, or Chapter 13).
Advantages of Chapter 13 Bankruptcy
A Chapter 13 bankruptcy offers a few significant advantages, the most important of which is dealing with your property and tax burden.
Help with Foreclosure
The first and most well-known advantage of Chapter 13 is its capacity to keep a house from foreclosure. Under typical circumstances, banks require borrowers to repay their whole mortgage arrangement after falling behind.
This is just not doable for many families struggling financially, and many end up losing their houses to foreclosure as a consequence.
In contrast, Chapter 13 debtors can request repayment conditions from the mortgage lender. Past-due balances are divided into manageable portions and repaid throughout the Chapter 13 plan. This permits the borrower to prevent foreclosure as long as they can make their regular monthly mortgage payments when the lawsuit is filed.
Filing bankruptcy does not offer you a free house; you must still pay your mortgage, but assuming you can, the automatic stay prevents your lender from foreclosing.
Getting Rid of a Second Mortgage in Bankruptcy in Nevada
In Chapter 13, you may be able to discharge the second mortgage. If the value of your property is less than the amount owed on your first mortgage, you can submit a petition to have the second mortgage reduced to zero.
If the court grants your request, the whole sum of the second mortgage will be considered an unsecured obligation. When you finish your Chapter 13 case, the second mortgage is discharged.
Auto Loan Cram Downs in bankruptcy in nevada
It is also essential for consumers to know that the basic principle of lien stripping — modifying secured loans to meet collateral value — also applies to car loans. People who file Chapter 13 bankruptcy in Nevada may reduce their car loan to match the value of the car.
Disadvantages of Chapter 13 Bankruptcy in Nevada
Chapter 13 bankruptcy has drawbacks, the most significant being the length of time a case lasts. Chapter 13 plans typically last 3-5 years. Throughout that period, the debtor is required to devote all of their disposable income to the payment plan. Every cent left over after costs must be used to repay unsecured creditors. This is a significant commitment that will endure a long time.
Negative Credit Score and Credit Report Impact
You might be wondering how a Chapter 13 bankruptcy would affect your credit score and report. It depends on your starting credit score, but you might lose 100 to 200 points.
Furthermore, Chapter 13 (like Chapter 7) is a public record and may be accessed through PACER. However, a Chapter 13 bankruptcy stays on your record for seven years, but a Chapter 7 bankruptcy stays on your record for ten years.
Limited Payment Plan Flexibility
A Chapter 13 bankruptcy usually has limited payment flexibility, so if your Chapter 13 payments are high, you may be limited in your alternatives. During that period, you are not permitted to acquire debt or sell assets without the permission of the bankruptcy court. In addition, if your income rises, your Chapter 13 payment may increase as well. You will be required to put all of your discretionary money into your Chapter 13 plan.
Length of Time That Chapter 13 Bankruptcy Process Takes
You may file a Chapter 13 bankruptcy immediately, but it will take time until you receive a discharge. A discharge in a Chapter 7 bankruptcy can be obtained in a few months; however, the average Chapter 13 bankruptcy case lasts 3 to 5 years. There are exceptions, but many plans take a long time.
Is Chapter 13 bankruptcy the best option for me?
Despite its sometimes-unfavorable reputation, Chapter 13 bankruptcy might have significant benefits, mainly if you are behind on your financial obligations or facing foreclosure.
Freedom Law Firm is here to help.
Bankruptcy is often the last but necessary resort. It is a delicate and complex proceeding, and you want someone with plenty of experience to consult you and guide you through the process and help you determine the scope of the discharge.
In many cases, unless a party in interest files a complaint objecting to the discharge, the bankruptcy court may issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.If you would like to find out whether bankruptcy is the right option for you, please request a call-back by submitting a short online form. All initial consultations are free and confidential.