Benefits of Chapter 13 Over Chapter 7 Bankruptcy

The main difference between the two is the requirement under Chapter 13 that you use your income to pay down your debt over time, while under Chapter 7, your property and possessions might be sold to pay off some debt.

The greatest advantage to filing Chapter 13 Bankruptcy over Chapter 7 is that only under Chapter 13 can a debtor be fully discharged of the bankruptcy.  If a debtor makes all of his payments according to the payment plan designed for him, he will be fully discharged of the bankruptcy.  Another advantage is that creditors cannot argue the payment plan which usually involves the debtor making payments interest-free to the creditor.  A debtor filing for Chapter 13 bankruptcy has up to five years to complete the payment plan.

Chapter 7 Asset Liquidation

Debtors typically think that filing for Chapter 7 Bankruptcy is an easy fix to a difficult problem. They think about the collection calls stopping and they think about not having the stress of making payments on bills they cannot pay.  A trustee is assigned to manage your estate once you file for Chapter 7 and that trustee assesses your property and sells of non-exempt assets to pay your creditors. Most states have laws which protect exempted property such as your house or one car. States vary widely on what is exempt from being sold in bankruptcy proceedings. It can be a painful process to have your possessions sold without your input. While for most debtors filing chapter 7, they will keep all of their property, there is always the possibility of losing some of it. In Chapter 13 Bankruptcy,on the other hand, your possessions are not sold because your income is used to gradually buy down the debt.

Chapter 13 Can Stop Foreclosure and Save the Home

Anyone facing a foreclosure lawsuit can defend it very effectively using chapter 13 bankruptcy laws. There are a number of legal strategies your attorney can use to 1. stop a pending foreclosure, 2. give a debtor a few months of leeway, and 3. workout a repayment plan to get the delinquent mortgage payments up to date, or "cured".

Many Debtors with Jobs Don’t have a Choice

Since the change in bankruptcy laws in 2005, more people are not allowed to file for Chapter 7 Bankruptcy and must file Chapter 13 Bankruptcy instead.  If you have an income, or if you have a lot of assets, you may not qualify for Chapter 7 Bankruptcy.  Chapter 13 bankruptcy has become the favored method through the new bankruptcy laws. Chapter 13 is better for debtors because they can maintain relationships with creditors by proving they are not walking away from their debts. Chapter 13 is better for creditors because they get at least part of the money owed to them.  Creditors are more likely to extend credit if there are laws which protect their interests in lending money.

Is A Bankruptcy Lawyer Worth the Money?

Hiring a bankruptcy attorney is always recommended by the Bankruptcy Court, because they do not have the time to deal with misfiled cases or poor bankruptcy planning.

If you file initially for a Chapter 13 bankruptcy, and you lose your job, or simply cannot keep up with the payment plan designed for you, you may end up filing for Chapter 7 bankruptcy and the money you spent up front may be for nothing. Whether to file for Chapter 7 initially rather than Chapter 13 requires thoughtful analysis of your budget, your income and your debt. A bankruptcy attorney can help you put the pieces together in the best way to protect you and protect your credit rating.