As of April 1, 2013 good news came to those debtors that were trying to qualify for a chapter 13 bankruptcy but had too much debt. The old chapter 13 debt limitations before April 1st were set at $360,475 for unsecured debt and $1,081,400 for secured debt.
However, the new chapter 13 debt limitations as of April 1st are $383,175 for unsecured debts and $1,149,525 for secured debts. While these are not huge increases they may just be enough that those debtors who have been previously turned down could be granted a chapter 13 and potentially fix their bad credit with a bankruptcy discharge.
Why File Chapter 13 over Chapter 7?
While a chapter 7 bankruptcy tends to be the most popular with debtors for the simple fact that it is cheaper, shorter, and your debts are wiped out; a chapter 13 offers many benefits as well. A chapter 7 proposes the threat of your personal bankruptcy being liquidated to repay your creditors, but in a chapter 13 plan you do not have those threats.
When you qualify for a chapter 13 bankruptcy your debts and your income are calculated by the judge and a payment plan is set in place. Over a three to five year period you pay a portion of your debts back with a lower interest rate and an affordable monthly payment. By doing you are able to make up any arrearages made on your mortgage or your car loan before bankruptcy.
What If I Still Don’t Qualify for Chapter 13?
Unfortunately, not everyone that has been turned away in the past will now be able to file a chapter 13 either. Along with the debt limits set there is still the fact of your income. If you make too little to repay your debt you would have to file a chapter 7 and have your assets (that you can’t exempt) liquidated.
If you happen to make too much for a chapter 7 and have too much debt for a chapter 13 you would be forced to file a chapter 11. Chapter 11 bankruptcies are usually for small business owners and tend to come with more risks. Both of these chapters pose the risk of your assets being taken to repay your creditors that can include both your home and you car.
Should you find yourself in this position, we can help you. Here at BankruptcyAutoFinancing.com we have a network of subprime lenders that specialize in helping bankrupt people find auto loans to fit their budget. Apply online today to see what you could qualify for, and use our bankruptcy auto loan calculator to calculate your monthly payment.
Remember, we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.