When a creditor may not have a valid lien, Chapter 13 gives you a good way to defeat that disputed lien and the claim against your property.
When a creditor fails to enforce its lien in a Chapter 7 case, you are left exposed. Not so under Chapter 13.
Here’s an example of how Chapter 13 can allow you to hold onto your home but then change your mind about it later.
As you decide whether to use the powerful tools of Chapter 13 to hold onto your home, it helps to know that you can later change your mind.
Chapter 13 gives you powerful ways to hold onto a vehicle, but it also lets you give up that vehicle without paying its debt.
For a debt to be secured, the creditor has to go through the right legal steps. Otherwise you don’t have to pay the debt.
Sometimes, even if what you bought is legally collateral on a debt, you can just write off and not pay the debt yet keep what you bought.
A judgment lien turns an unsecured debt into one secured by a lien on your home. Bankruptcy can undo that, and write off the debt.
A secured debt effectively turns into an unsecured debt if you surrender the collateral, which may make sense to do more than you think.
A secured debt can be handled like an unsecured debt if you surrender the collateral, “avoid” a judgment lien, or just keep the collateral.
To the extent you do not pay off your debts during a Chapter 13 payment plan, the remaining balance is usually legally written off forever.
If you have an “asset” Chapter 7 case, some or all of your debts are partially paid, with most or all of the remaining amounts written off.
In most straightforward Chapter 7 cases all debts not secured by any collateral are discharged–forever written off. You pay nothing on them.
If your home is exposed to your creditors and to the Chapter 7 trustee because it has too much equity, Chapter 13 can protect that equity.