What Are the Advantages of Chapter 13 Bankruptcy Over Chapter 7?

Bankruptcy law is one of the areas that has changed rapidly in the last several years. One of the things that has stayed the same is the choice between Chapter 7 and Chapter 13 bankruptcy. Of course, you should never make a decision without talking to a legal professional first.

Both Chapter 7 and Chapter 13 bankruptcy provide relief to individuals who have more debt than they can handle. However, one may be better suited to your needs going forward.

Chapter 7 Bankruptcy

During a Chapter 7 bankruptcy, a trustee is appointed to sell off the debtor's non-exempt assets and use that money to pay off the creditors. You are more likely to benefit from Chapter 7 if you have a large amount of unsecured debt, such as medical bills and credit card bills.

One of the advantages of a Chapter 7 bankruptcy is that the debt is discharged as soon as the judge grants the bankruptcy. As soon as the court decides the case, you can move on with your life. This is in contrast to a Chapter 13 bankruptcy, where a repayment plan is needed.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is also called a reorganization bankruptcy. The debtor may keep his or her assets, but there will be a payment plan where the debtor is required to make payments to creditors. Before getting started, the debtor must present that repayment plan to the court. The court needs to approve the plan before the bankruptcy can go forward.

One of the disadvantages of a Chapter 13 bankruptcy is that your debt will not be discharged until the payment plan is done, which could take several years. One advantage of Chapter 13 is that there are some kinds of debt that can only be discharged through a Chapter 13 bankruptcy.

Not All Debts Are Dischargeable

Anyone thinking about bankruptcy must consider what kind of debt they have. Certain kinds of debt are never dischargeable through bankruptcy, and some kinds of debt are only dischargeable through bankruptcy under certain circumstances.

Several kinds of debt are dischargeable, such as medical bills, personal loans, and credit card bills. Any loan that is backed by security is not dischargeable because the creditor is allowed to take the security. For instance, car loans and mortgages use automobiles and real estate property as security. You should speak with an attorney if you have any questions about what kind of debt can be discharged.

Eligibility

Just because you have a large amount of debt does not mean that a court will automatically forgive it. If you are trying to file a Chapter 7, the judge will say no if you make too much money. If you are trying to file a Chapter 13, you may not be eligible if your debt level is too high. You should speak with someone about eligibility before you try to file for bankruptcy.

What are your goals?

Both Chapter 7 and Chapter 13 bankruptcies allow you to start over, but you will start over in different places. With Chapter 7 bankruptcy, you will start over in a completely new place with all your debt wiped clean.

In Chapter 13, you will still have some debts, but you can start over in a better place where you are caught up for now. You also need to consider whether you have any assets that you would like to keep. Depending on what you own, you may want to try a different method of taking care of your debt problems. Some people lose their family house or other important assets by filing bankruptcy, and you must consider what you are doing.

Get Started Today

Filing a bankruptcy is a very personal decision and it is one that should not be taken lightly. It is important that you understand what to expect throughout the process and the impact it can have on your credit score and your ability to secure loans and other financial opportunities in the near future.

To determine which type of bankruptcy filing is right for you, contact our team at Lazarus Law, LLC, to schedule a consultation by calling (717) 298-0852 today. Our team has more than a decade of experience helping individuals across Eastern Pennsylvania with their bankruptcy filings. Our team can help you decide which option is best for you and guide you through the legal process from start to finish.