If you are looking to reorganize your debt, it may be worthwhile to look into filing for Chapter 13 bankruptcy. Although you will need to make payments to creditors for up to five years, you’ll be able to keep your Minnesota home, car or other assets throughout the reorganization bankruptcy process. Let’s take a look at some other reasons why a Chapter 13 proceeding might meet your needs better than a Chapter 7 proceeding.
The bankruptcy will come off your credit report sooner
The fact that you filed for a reorganization bankruptcy will appear on your credit report for seven years. However, if you file for Chapter 7 protection, it will stay on your credit report for up to a decade. Once an item falls off of your credit report, it is like it never existed to begin with. Therefore, a lender, employer or other party interested in looking at your financial background won’t necessarily know that you previously sought protection from creditors.
You may be able to reduce the amount owed to creditors
If you have negative equity in your vehicle, it may be possible to obtain a cramdown. The cramdown reduces the amount of your existing auto loan to the car’s current fair market value. It may also be possible to strip a second mortgage lien on your home if you owe more than the house is currently worth.
In the event that a mortgage lien is stripped, the secured home equity loan debt is converted to an unsecured balance that may not need to be repaid. There is also a chance that outstanding tax debts may also be reduced or eliminated if you meet certain criteria.
If you need help managing your finances, it may be worthwhile to speak with a bankruptcy attorney. This person may be able to provide more information about the possible benefits of seeking protection from creditors such as lien stripping or an automatic stay. Your attorney may also assist in the process of filing bankruptcy paperwork in an accurate and timely manner.