Why File for Chapter 13 Bankruptcy

In this article, I will discuss filing for Chapter 13 bankruptcy in Utah. Bankruptcy refers to the legal procedure in the U.S. that enables individuals and businesses to eliminate or repay debts under the protection of the federal bankruptcy court.

A Brief History of Bankruptcy

Bankruptcy did not exist in ancient times because individuals who could not pay their debts were forced into indentured servitude. For many today, being at the mercy of their creditors is another form of indentured servitude. However, in modern times, bankruptcy law enables individuals to get out of debt or to restructure their debt in a way that enables them to pay their creditors. Bankruptcy has also become a way for businesses to reorganize and keep afloat in hard economic times. Different countries have different laws concerning bankruptcy. Some countries do not have bankruptcy laws while others only have laws that pertain to businesses. The U.S. has a federal law which helps people who have too much debt.

While the broader economic climate from the mortgage crisis to global economics affects us all, some have been harder hit than others. Debt can accumulate if you’re out of work for an extended period of time or incur high medical expenses. Although we hear that economic times are improving, that is not true for everyone.

In 2014, there was an average of 75,000 bankruptcy filings per month. About a million individuals and businesses filed for bankruptcy in the United States.

Filing for bankruptcy may be a good option if you have accumulated debt because you have lost your job, or you face foreclosure on your home or repossession of your car. Bankruptcy can be the best way to get back on your feet and start fresh and debt free. With the help of the bankruptcy process, you may be able to better manage monthly bill payments. And you may decrease the interest rate on those bills or eliminate them altogether.

Why File for Bankruptcy?

In the U.S. today, individuals file for bankruptcy because they: (1) can’t pay their debt and have very little income or property, or (2) are behind in making payments on their debt and want to keep their property, such as a home or car. Bankruptcy law has become a way for individuals to get out of debt or to restructure their debt in a way that enables them to pay their creditors. Other forms of bankruptcy filings can also help a business reorganize and keep afloat in tough economic times.

Bankruptcy laws may seem complicated at first, but they can be broken down into manageable pieces. The goal here is for you to understand whether or not it makes sense for you to file for bankruptcy. And to what to expect if you go forward. Filing for bankruptcy is a big step and if you’re thinking about filing, care should be taken to make sure you will not be worse off by filing.

Filing for Chapter 13 Bankruptcy in Utah

One of the advantages of hiring a Utah Chapter 13 bankruptcy lawyer and filing is that creditors are required, by law, to halt any efforts on their part to repossess items or otherwise demand payments from the debtor. Furthermore, opting for Chapter 13 bankruptcy can, in certain circumstances, put a stop to or put a hold on foreclosure proceedings. Chapter 13 bankruptcy also gives homeowners the opportunity to repay their past due mortgage payments over a 3 or 5 year period through a court-ordered payment plan.

In addition, if the debtor’s home has no equity (the first mortgage balance exceeds the current fair market value of the home), the debtor may have the ability to remove the second mortgage in Chapter 13 bankruptcy proceeding (a lien strip). Removing the second mortgage is typically done through an adversarial proceeding in the bankruptcy court. If the homeowner is successful the proceeding, the court will order that the second mortgage is removed from the property. Upon removing the second mortgage, the debt will be treated like any other unsecured debt.

End Up Paying Less

Generally, through a Chapter 13 Bankruptcy, my clients often end up paying back less than they owe. While secured loans — loans that are guaranteed by the pledge of an asset such as a car or a house —must be paid back in full, unsecured loans, such as credit card debt, may be eligible for a significant reduction of the amount owed. Only through the bankruptcy court process can a debtor legally compel a creditor to accept a reduction in the total sum of the amount due. For that reason, it is especially useful to have a legal representative assist you with your filing so that you can maximize your chances for a beneficial outcome. In addition, all creditors must comply with the terms of the court-ordered Chapter 13 plan.

Contact Ryan E. Simpson

Please call me today at (801) 432-8682 to discuss your specific situation and how Bankruptcy may be right for you.