When is Chapter 13 a better choice than a Chapter 7?
If you have a car that was purchased more than 910 days before you file bankruptcy, Chapter 13 might be a better option for you as opposed to Chapter 7. In a Chapter 13, if your car was purchased more than 910 days before filing, section 506A valuation will apply to your plan. This means that you may have to pay back only the value of the car and not the entire amount owed on your claim. For people who are upside down on their car loans, this is a huge benefit. If you would like to check out the value of your car, I recommend that you go to www.nada.com.
In addition to wiping out some of the amount owed on your vehicle, the interest rate paid on car notes in most plans is currently between six and seven percent. Most buy here pay here lots in Northwest Georgia charge between 25 and 30 percent annual interest. In Dalton and Calhoun, I see used car dealers charge 30 percent interest all the time. Chapter 13 can give you a huge savings in interest payments.
For people who are behind on car payments, Chapter 13 allows you to pay the entire car note through the plan and keep your car. This is a great tool for stopping car repossessions. In contrast, chapter 7 bankruptcy does not help people who are behind on their car payments. In fact, if you are behind on your car payments and you file chapter 7, you can just about guarantee that you are going to lose that car unless you bring the payments 100 percent current.
Chapter 13 also allows a person to take any missed mortgage payments on a house and pay them out over the course of the plan. Most plans run from three to five years. Chapter 13 is a great tool for stopping foreclosures. In contrast, chapter 7 will stop your foreclosure only for a short time. If you are behind on mortgage payments and you want to keep your house, chapter 13 is the way to go.
Call me today for your free consultation at 706-295-0030 and lets see if which type of case is best for you.