Chapter 13 bankruptcy allows you to consolidate your debts into one payment plan, enabling you to both keep select assets while reducing your debt to a manageable level. On the surface, this may appear similar to what debt consolidation programs offer. However, filing Chapter 13 has distinct advantages over these programs, and most importantly, the backing of the federal court system.
Reduce Your Debt
In creating a Chapter 13 payment plan, the court will typically reduce the principal you owe on your debts, sometimes by as much as 90%. The reduction in principal allows you to create a realistic payment plan, which is the purpose of Chapter 13. Debt consolidation programs must negotiate with creditors, and only request that they lower interest rates or overdue balances. Chapter 13 offers you the authority of the court to mandate what amount a creditor will receive.
Freeze Foreclosure and Collection Proceedings
Upon filing bankruptcy under any chapter, an automatic stay is immediately put on all collection efforts by creditors. An automatic stay prohibits any contact by creditors, such as telephone calls, letters, and appearances at your home. The stay also freezes any foreclosure proceedings or wage garnishments, and even prevents a creditor from filing a lawsuit against you. Debt consolidation programs don’t have the authority to provide any of this relief.
Establish a Defined Payment Schedule
Chapter 13 payment plans are designed to be completed within three to five years. Upon completing the plan, all debts are discharged. Debt consolidation programs don’t provide this certainty, and may outline a plan that requires payments over many years without significantly reducing your balance.
Protect Your Interests
If you file for Chapter 13 bankruptcy, then you will likely hire an attorney to represent you. Every attorney has a strict ethical obligation to represent his or her client zealously, competently, and with due diligence. You are guaranteed that your attorney, unlike a debt consolidator, will represent not only your best interests, but also fight to ensure you receive the best results possible. Debt consolidation programs simply cannot provide this security.
Filing bankruptcy is a major decision, but it may be the right choice for you. Consult a bankruptcy attorney to answer your questions and learn exactly how Milwaukee bankruptcy will affect you. Call the Burr Law Office at (262) 827-0375 for answers to any questions you have. Contact us today to learn more about your financial options.