When Chapter 13 Bankruptcy Is Better For Filers Than Chapter 7

Most people assume that chapter 7 bankruptcy is the best route to take when they file. It has the advantage of eliminating debt quickly and completely. It's not the right type of bankruptcy for everyone, though. Read on to find out situations that may call for filing chapter 13.

The Filer Has Too Much Income 

Chapter 7 has income restrictions for filers. Their income is compared to the median income in their state and that can cause many not to qualify for filing chapter 7. Chapter 13 does not limit filers from gaining debt relief according to their income. This allows people of all income levels to gain a repayment opportunity.

The Filers Want to Do the Right Thing 

Chapter 7 filers may be plagued with guilt about discharging their debts. Chapter 13, however, is a debt repayment program. While some debts or parts of debts can be forgiven with chapter 13, the filers mostly pay what they owe to their creditors over time. This type of arrangement can allow some filers to feel better about their financial situation.

Filers Can Save Their Home

With chapter 7, filers may be challenged to get their mortgages caught up so that they can avoid foreclosure. Although the automatic stay provides a reprieve from court actions like foreclosure eventually, they could lose their home anyway if they don't get their payments up to date. With chapter 13, debtors can work out a payment plan that can place less of a burden on them. They can get their mortgage caught up and save their home.

Filers Won't Lose Property 

While you can still lose property secured with a loan if you fail to get caught up on missed payments, chapter 13 protects the rest of your property from seizure. Chapter 7 filers can use their state's exemptions to a certain extent to preserve their property, but chapter 13 filers never need to worry about that issue at all.

Filers with Tax Debts Can Benefit 

With chapter 7, many tax debts cannot be included in the filing and cannot be discharged. That can also mean the tax liens and wage garnishments that sometimes accompany a tax debt will remain in place. This prevents chapter 7 filers with tax debts from obtaining complete debt relief. With a chapter 13 filing, filers can make payment arrangements to pay off their tax debts in an affordable manner. In some cases, filers may even be able to have some of their tax obligations forgiven or reduced.

To find out more about either chapter 7 or 13 speak to a bankruptcy attorney at a chapter 13 bankruptcy law firm.