A Chapter 13 Bankruptcy IS a better asset protector than a Chapter 7
By: Darrell Castle
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Is Chapter 13 a better asset protector than Chapter 7?
Hi, I’m Darrell Castle and I’m an attorney licensed to practice law in the state of Tennessee and that’s one of the questions people ask me quite often and the answer to that question is YES, it definitely is. And here’s what I mean by that.
In Chapter 13, if you were behind on your house payment – on your mortgage – you would be able to include that past due mortgage amount in your Chapter 13. And instead of having the whole thing due at once, or your house lost in foreclosure, instead of having to pay a lump sum payment the mortgage company will demand from you, you can put that mortgage into a Chapter 13 plan and pay it back over a period of months at a price you can afford and continue to live a happy life and stay in your house – a house totally protected from the creditors by Chapter 13.
You cannot do that in Chapter 7. Most of the time you can keep your house in Chapter 7, but you have to be current on it to do that.
The same is true for your automobile. Let’s say you’ve had your car for 910 days. That is the amount of time that is required by law – two and one-half years. If you’ve had your car for two and one-half years, then you pay back the value of the car – the value according to what the NADA book says, not what you owe; and then the difference between the value and what you actually owe is just unsecured debt.
So you can vastly lower your car payment that way.
If you have not owned your car for two and a half years, then you can usually still lower your car payment and keep your car, even if you’re behind, by lowering the interest rate and amortizing it over a longer period of time.
All of those things are possible in Chapter 13 but not in Chapter 7. That is what makes Chapter 13 a very good asset protector. The expression, “seeking bankruptcy protection,” is very appropriate for Chapter 13. That is what Chapter 13 is – an asset protector.
There are many rules and regulations that control all these things and that is a good subject for our next video.