Don’t make the mistake of assuming that Chapter 7 is for you
If you are having debt issues and are considering bankruptcy to deal with them, you may already be familiar with the benefits of Chapter 7 bankruptcy, as most individuals choose to file this type. However, since another option, Chapter 13, is available, you may be curious when this type of bankruptcy would be a better choice. Although less popular, Chapter 13 offers several benefits not available in Chapter 7.
Better protection against foreclosure
One of the greatest benefits to filers of Chapter 13 is superior protection against foreclosure. The reason for this is the long period of time it gives you to catch up with your overdue mortgage. In Chapter 13, the overdue portion of your mortgage becomes part of the payment plan, giving you 3-5 years to pay it off using affordable monthly payments. As long as you make your agreed payments towards your overdue debt each month, Chapter 13 prevents your lender from foreclosing on your house.
In Chapter 7, if you do not bring your mortgage current within a short time after filing, your lender may ask the court to allow it to restart foreclosure proceedings against you.
Protection of your property
Another benefit that Chapter 13 offers its filers is that it allows them to keep all of their property throughout the bankruptcy. This is important if you own property that is not exempt from liquidation by law, such as second homes, luxury items, cash or multiple vehicles. During Chapter 7, your nonexempt property is sold to pay down your debts. However, in Chapter 13, there is no threat of losing any of your property, provided that you keep up with your obligations under the payment plan.
If you owe debts jointly with someone else, Chapter 13 is especially attractive. In such cases, if you file Chapter 7, your creditors may go after your co-debtor for the balance of the debt. However, as long as you keep up with your plan obligations, your co-debtor is protected against this in Chapter 13.
Help with non-dischargeable debts
If a significant part of your debt load includes debts that cannot be discharged in bankruptcy, such as student loans, some taxes, alimony or child support, Chapter 13 can offer some help. Although Chapter 13 will not discharge these debts, it does allow you to include them as part of the payment plan, giving you 3-5 years to pay them off or become current on them. As long as you keep up with your payments under the plan, you are protected against garnishment, lawsuits and other attempts to collect these debts.
An attorney can help you decide
The decision about the type of bankruptcy to file is not one to be taken lightly, as it can determine whether you succeed or fail at your goal to become financially solvent. An experienced bankruptcy attorney can analyze your situation and recommend the best solution to your pressing debt concerns.