There are other advantages to filing chapter 13 that may not be easily seen. The interest on the debt that you owe stops accruing. So let's say you owe $200,000 unsecured debt, in credit cards. Well, if the interest rate on that is 20 percent that's going to be $40,000 every year, accumulating every year. Once you file a chapter 13 the interest stops and all you owe is $200,000 which has to be paid in full or just a portion has to be paid back in three to five years, determined by how much income you make.
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If you make under the median income, you usually have to make the chapter 13 payments for 36 month. However, you do have the option of extending the payments to 60 month. Having no interest on the debt that you owe, and having large mortgage arrears might be a good reason to extend the payments to five years.
Chapter 13 Repayment In Illinois debtor can pay as little as 10 percent of unsecured debt, in a chapter 13 bankruptcy. One way to get into this little repayment plan is to show that you don't have that much equity and you don't have a lot of excess income after all of the expenses. Now remember, when you're trying to save a house, chapter 13 may be your best option. By repaying those late payments that you still have to pay without the interest. However, the late mortgage payments are not considered unsecured debt that needs only 10% payment, but it is a special debt that needs a full 100% repayment.
Chapter 13 procedures Now, let me just explain some of the procedures that happen in bankruptcy. Once bankruptcy is actually filed there is an automatic stay that begins. Automatic stay starts upon filing, and basically what that does is that stops any creditor from, in any way, collecting debt. So if you're getting those phone calls from creditors, once you actually file you're not supposed to be getting them, and if you are just tell you have filed for bankruptcy and there is an automatic stay. They actually do not have a right to be calling you, and that's one of the benefits. Even your house mortgage company doesn't have a right to be collecting, unless they actually go for a foreclosure.
As you can see, Chapter 13 can have some great opportunities to save property that otherwise would be lost. Consult with an experienced bankruptcy attorney in your area for further information on how Chapter 13 may be an option.
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