Why Chapter 13 Bankruptcy Is The Better Choice
Do you need to file for bankruptcy to get out of your tough financial situation, and do you have the choice between using Chapter 7 and Chapter 13? You'll probably want to use Chapter 13 due to the following advantages that it provides.
One of the biggest benefits of Chapter 13 bankruptcy is asset protection. When you use Chapter 7, there is a list of non-exempt assets that can potentially be liquidated to help pay off debts that you owe to creditors. However, the Chapter 13 process works a bit differently and you are able to keep those non-exempt assets that you could lose with Chapter 7. This is due to you paying off a portion of the debt through a Chapter 13 repayment plan. In the end, you may find that the repayment plan may equal the amount of lost assets due to liquidation, making Chapter 13 the better choice.
Do you own a home and are worried about losing it during bankruptcy? Know that a Chapter 13 bankruptcy is going to let you stop any current foreclosure process happening with your home. You'll have some time to catch up on any missed payments through that Chapter 13 repayment plan, and you'll be able to keep your house in the end.
Did you have someone that cosigned on a home with you? That person would be responsible for the debt if you were to use a Chapter 7 bankruptcy and couldn't afford to pay for your home. However, Chapter 7 gives you that time to catch up on missed payments, which gives your cosigner the protection they need from being responsible for your mortgage.
Lower Impact On Credit
Going through bankruptcy is going to have a negative impact on your credit, as future creditors will see the bankruptcy and may not approve you to borrow money in the future. Chapter 7 bankruptcy is going to have a bigger impact on your credit than Chapter 13, which is due to Chapter 7 discharging many of the debts that you owe. Chapter 13 reduces your debts to a portion that you pay back in a repayment plan, and stays on your credit report for a shorter amount of time because of that.
Both Chapter 13 and Chapter 7 bankruptcy do not allow you to discharge debts related to taxes or student loans. However, Chapter 13 gives you the opportunity to modify those loans. Much like with mortgage payments, missed student loan payments and back taxes can be included in that repayment plan.
Contact a Chapter 13 bankruptcy lawyer for more info.