File A Chapter 13 to Buy Time! (Even If You’re Not Insolvent!)

You can file for bankruptcy protection even if are not technically insolvent. 

The common definition of insolvency is the inability to pay one's debts as they fall due.  So, if you can pay some or most of your bills, you don't fit the definition.  But you still might need the help that filing a bankruptcy can give you.

The first thing that happens when a bankruptcy is filed is that any debt collection or enforcement is immediately stoped.   That relief may be just what is needed to slow things down long enough to get caught up on a bill, or fix a recurring economic problem.

Here are three good examples of when filing a Chapter 13 makes sense even if you aren't broke:

1.    If there is a 2nd or 3rd deed of trust on your house, and the property isn't worth as much as you owe on the1st deed of trust, you can treat the junior lien(s) as unsecured.  You will pay only what you can afford,  rather than the full amount of the loan and still keep your house.

2.    If you have a tax bill that can't be paid off in a year (the normal time the IRS will give you to resolve a delinquency), you can spread the payments out for as long as 5 years. (You might even be able to make some of the debt go away!)

3.     If you simply need some more time to make things work, then a Chapter 13 can provide that.  For example, if your house is in foreclosure because you got behind in your payments, filing bankruptcy will allow  you to make minimal payments over a five year period until you are no longer behind.

So, if you find yourself needing a break from creditors, speak to a competent Chapter 13 attorney about the advantages of filing bankruptcy.

By Douglas Jacobs

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