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Is Chapter 13 Bankruptcy the Best Option for You?

Deciding that bankruptcy is the right solution to help you with your financial struggles is a big commitment. Many people assume that filing for bankruptcy will destroy their life and cost them everything they own, which isn’t the case. Though Chapter 7 bankruptcy might result in the loss of your assets, Chapter 13 bankruptcy allows you to protect your assets and even pay back a good portion of the debt you’ve accumulated.

But how do you know it’s the right option for you?

Chapter 13 is sometimes called “wage earners bankruptcy” because it requires a person have an income. In this type of bankruptcy, you create a repayment plan and in order to meet that obligation, you need income. It offers many of the same protections as Chapter 7 bankruptcy, but requires more commitment from you for a longer time.

What’s the Point of Filing for Bankruptcy If I’m Forced to Repay My Debts?

It makes sense to question why you’d choose Chapter 13 over Chapter 7, considering the latter releases you from the majority of your debt obligations. After all, why pay money to creditors if you can create an arrangement in which you get to keep your money and be released from your debt?

The truth is Chapter 13 offers protections that are not offered by Chapter 7 – something that might not be important to some people, but is essential to others. There are plenty of people who would not file for bankruptcy if their only option was to file for Chapter 7.

Chapter 13 provides flexibility to deal with your financial issues. For instance, you’re given time to pay debs that wouldn’t be discharged in a bankruptcy, such as past due child support or tax debts. It also makes it possible to cure mortgage defaults. Chapter 13 also allows you to include some marital property debts. These are all things that likely wouldn’t happen if you chose to file for Chapter 7.

In some ways, Chapter 13 is the best of all worlds.

It provides many of the protections of Chapter 7, as well as ones that aren’t a part of Chapter 7. It also includes the advantages of a payment arrangement you might make with a creditor outside of bankruptcy, only it comes with the benefit of guaranteeing that creditor is legally bound to that plan.

Chapter 13 is about debt management and it has the added bonus of being court-enforced. This not only means you have obligations, it also means you’re protected.

You can read more about the differences between Chapter 7 and Chapter 13 bankruptcy in this article from Experian.

How Do You Know Chapter 13 is a Good Option for You?

There are a few questions you can ask to help you determine if Chapter 13 is your best bet. For instance:

  • Do I have debt that will not be discharged in a Chapter 7 filing?
  • Do I have liens that are more than the value of the asset?
  • Have I fallen behind on mortgage or car payments?
  • Are you assets worth more than the exemptions available in Chapter 7?
  • Would you income could trigger an objection by your creditors?

Determining whether Chapter 13 is going to work for you can be a complicated process. We can help. For more information or to schedule a consultation to discuss your bankruptcy options contact the Law Office of Robert M. Geller at 813.254.5696.

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