Chapter 13 Bankruptcy / Chapter 7 Bankruptcy

When Chapter 13 Bankruptcy May Be a Better Option than Chapter 7

Distinguishing differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy may be just the beginning in understanding which chapter will provide the best solution for your situation.  Even if you meet qualifications to file Chapter 7, it may be more beneficial for you to file Chapter 13.  In other words, you may give yourself more advantages in filing Chapter 13 than what is offered in Chapter 7.  The following points can help shed light on each solution.

  • Chapter 13 can help you get caught up on car and mortgage payments.  Chapter 7 doesn’t offer the option if you want to reinstate or make up missed loan payments overtime.

  • You have obligations and debts that cannot be wiped out in Chapter 7.  Meaning, a Chapter 13 plan will help you repay such obligations so you remain in good standing with your creditors.  These obligations include back taxes, child support, alimony, and student loans just to name a few.

  • You want to pay back what you owe but need the protection of the bankruptcy court.  You have good intentions on repaying what you owe, but creditors are hounding you for payment.  A Chapter 13 repayment plan can provide the formal structure you need to keep creditors away, while you make payments you can afford over a period of time.

  • Chapter 13 may help you keep nonexempt property while making payments.  Chapter 7 can be an option if you want to surrender property to satisfy creditors, but nonexempt property remains protected in Chapter 13 as long as you make payments according to your court-approved plan.

  • Chapter 13 provides protection for you and a co-debtor.  If someone co-signed a loan for you and you file Chapter 7, the co-signer could be pursued for payment by creditors.  In Chapter 13, both parties are protected as long as the debtor makes agreed payments.

Reference: http://www.nolo.com/legal-encyclopedia/chapter-13-7-bankruptcy-reasons-29576.html