Sometimes an individual goes under financially. He may not be able to make his loan payments or even his mortgage. He may be in danger of losing his house.
Legal expert dslaw.com provides an explanation for possible relief from creditors. This can help an individual to restructure loan payments, at the same time stop any foreclosure proceedings.
Filing for Bankruptcy
When a person cannot pay his loans, he may incur lawsuits from his creditors. To get relief and keep the suits at bay, the individual can file for bankruptcy. Usually, this is a chapter 7 bankruptcy filing. This is an admission that the person cannot pay within the timeframe of the loans.
When that happens, the courts will name a trustee who will take the individual’s assets, and sell them to pay the claims. Some properties are not included in the sales of assets. These are exempt property that the person can keep and help him to get a fresh start.
Another type of bankruptcy is that under Chapter 13. This allows the debtor to restructure his debt payment, over 3 or 5 years. Those with regular income usually avail of Chapter 13 bankruptcy. During the period of bankruptcy, creditors cannot make any collection efforts.
At the same time, the debtor cannot make any new loans.
Restructuring Loan Repayments
Chapter 13 is for those who wish to repay their loans but require more time to do so. Having a regular income means that the debtor can pay, even if it is on an extended schedule. The loans payment schedules are restructured, allowing the individual to repay them in due time.
There are other provisions in Chapter 13 bankruptcy, including those that protect the co-signer.
In addition, debtors will have no contact with their creditors. Instead, a trustee is directed to collect the loan payment and distribute this among the creditors. And this is why this is ideal for wage income earners.