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Bankruptcy Considerations During the Coronavirus (COV-19) Part 2: Chapter 13 Bankruptcy.

As a result of the Coronavirus (COV-19), the unemployment rate has increased rapidly and reports suggest that the unemployment rate may reach 30% in the country.   This immediate loss of income for many individuals and families have left them unable to meet their continuing financial obligations such as paying for their mortgage, credit card bills, medical bills, etc.

If an individual or family is in a position where they are behind on their mortgage or other bills, filing a Chapter 13 bankruptcy may be good option for getting them back on track financially.

While some people worry that there is a negative connotation attached to the word “bankruptcy,” filing a Chapter 13 bankruptcy has several benefits to people and families which need financial relief.


Protect the House

One of the main benefits of filing a Chapter 13 bankruptcy is that homeowners are provided with additional time to catch up gradually on past due mortgage.   A common example of why an individual may file a Chapter 13 bankruptcy is in the event that his or her house is being foreclosed on.  Filing a Chapter 13 bankruptcy will stop that foreclosure action immediately, give the individual time to formulate a plan to repay past due mortgage payments, and potentially provide time to dictate new terms for the mortgage under a mortgage modification.

Further, so long as the individual makes the required mortgage payments during the life of the bankruptcy, the individual will be allowed to maintain and enjoy his or her home.  This is different from a Chapter 7 bankruptcy, where one’s home is at risk of being sold in the bankruptcy to satisfy debts.


Chapter 13 Plan

An individual who files a Chapter 13 bankruptcy will be required to file a Chapter 13 plan.  The plan will outline how the individual will pay off his or her debts over a period of time.  Generally, the duration of time provided to pay these debts are extended over the course of three to five years.  Further, the total amount that is paid to certain unsecured creditors over those three to five years may be less than the full amount owed.  Nevertheless, so long as the individual makes the payments pursuant to the repayment plan, creditors cannot pursue the individual any further as any remaining debt will be considered discharged.


Credit History

While an individual’s credit will initially suffer as a result of filing any type of bankruptcy, a Chapter 13 bankruptcy stays on a credit report for seven years – compared to a Chapter 7 bankruptcy which stays on a credit report for ten years.


Contact Us

The decision on whether to file bankruptcy is a difficult one and the process for filing bankruptcy may be confusing and time consuming.  We want to help advise you through these hard times that have been brought by Coronavirus and discuss the options available to you.  Therefore, if you have any questions or would like to discuss the benefits of filing a Chapter 13 bankruptcy, please visit our website or contact one of our lawyers at (973) 890-0004.

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