For those beginning to research the intricacies of Texas bankruptcy law, you will quickly learn that all bankruptcy codes are not equal. Each “chapter” offers the individual unique advantages and rules, but it is important to understand the differences. The three most popular forms of bankruptcy are known as Chapter 7, Chapter 11, and Chapter 13. While your choice of which to file for depends on your personal circumstances, know that Chapter 13 bankruptcy offers a set of unique advantages which the other two do not bring with them.
Chapter 13 offers the unique ability to ‘cramdown’ underwater debts. Essentially this means you can reduce the amount of debt you owe on a piece of property to the actual value of the property that secures it. Example: if you owe $18,000 on a car loan and the car’s replacement value is only $14,000, you can set up a plan where you only owe the creditors the $14,000. The rest of the debt would then be discharged. Some restrictions and rules apply, so anyone looking to pursue this should find out more before doing so.
Stopping a Foreclosure
Filing for Chapter 13 can actually help you halt a mortgage foreclosure. When filing for this form of bankruptcy, the lender is forced to accept an approved foreclosure plan with regular monthly payments. An individual must prove he/she has the financial capability to meet the requirements of the repayment plan in order for it to be approved.
Keep Nonexempt Property
Chapter 13 is one of the only forms of bankruptcy that allows you to keep all your property. All of your debt will be paid back in repayment plans setup with the individual creditors.