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St Louis Bankruptcy: 3 Main Reasons Why Someone Would File A Chapter 13


There are many reasons why someone would choose to file a St Louis Chapter 13 (as opposed to a Chapter 7). Although most people think of a Ch7 when they contemplate a bankruptcy, the Ch13 option is sometimes the better route to go. Below are three main scenarios in which a Chapter 13 makes sense:

  1. YOUR ARE FACING A FORECLOSURE. If your mortgage company has set a foreclosure sale date on your home (and you want to keep the house), then a Chapter 13 is the better option. The Ch13 will stop the foreclosure, and get you into a repayment plan (spread out over the course of three (3) to five (5) years so that you do not have to come up with a lump sum to get caught up.
  2. YOUR CAR WAS JUST REPOSSESSED. A repo’ed car can be returned to you upon the filing of a Ch13. Once the car is safely back in your possession, the Ch13 repayment plan will allow you to pay off the car loan at a lower interest rate (currently set at 4.75%).
  3. YOU ARE ABOVE THE MEDIAN INCOME LEVEL. In 2005, Congress devised a “Means Test” to determine if you are above or below the median income level. This is based on two main things: the number of people in your household, and the total household income. For instance, let’s say you are a household of two (you and your spouse). According to the government, the average (or median) income for a household of two is: $52,783. If your total household income i.e. the combined income between you and your spouse) is $80,000, then you are clearly above the median income level. In this type of situation, you would have to do a Chapter 13 (as opposed to a Ch7).

These are perhaps the most common situations in which a Chapter 13 would make the most sense. In addition, there are a lot of other benefits that you can expect from a 13 (that you cannot receive in a 7). For example, if you have a second mortgage on your house, it is possible in a Ch13 to strip off (that is to say, get rid of) this junior lien altogether. This is a bonus that can happen only in a Ch13. Or if you purchased your car more than 910 days ago (approximately two and a half years ago), then instead of paying off the balance of the existing car loan, the court will “cram down” the amount you owe to the actual Fair Market Value of the vehicle (which can often be quite a bit less than the current balance).

The affordable St. Louis bankruptcy attorneys at The Bankruptcy Company have been saving and protecting people’s assets for years. Our goal is to make sure that you keep the assets and property you want, discharge the debts that you want to get rid of, and do it all at an affordable cost to you. All phone conversations and office consultations are free of charge.

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