When Should You Choose Chapter 13 Over Other Forms of Bankruptcy

by | Jun 18, 2021 | Chapter 13, Bankruptcy, Foreclosure, Shameless Self-Promotion

Choosing the Right Bankruptcy Relief

If you’re having some financial problems, you might want to consider bankruptcy filing. But first, you may want to figure out what possible relief you might want to go for in bankruptcy.

Both Chapter 7 and Chapter 13 bankruptcy can provide different types of relief. But, whether you can file a bankruptcy petition under one or the other chapter depends upon a number of factors.

Some debts and situations necessarily lead to a Chapter 13 case rather than a Chapter 7.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy procedure can typically end quickly. Several months can pass from the initial credit counseling to the point where the bankruptcy court discharges your remaining debts.

Chapter 7 allows the debtor to discharge most of unsecured debts, such as credit card debt, personal loans, and medical bills, without having to repay them. However, the debtor can lose certain assets. A bankruptcy trustee can liquidate nonexempt property to repay creditors.

Moreover, if you have debts that are non-dischargeable, such as child support or alimony, you will still have to pay them after a Chapter 7 bankruptcy case is over.

What Is Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy involves a court-approved repayment plan. The debtor has to propose a plan to repay debts to creditors over the next three to five years. The repayment plan involves monthly debt payments.

Debtors can use Chapter 13 to catch up on certain payments or pay back the IRS. After the case is over, the debtor can receive a discharge that can wipe out the remaining debt.

When Should You Choose Chapter 13?

Here are a couple of different debts that you may have that should probably push you a little more to choose Chapter 13 rather than Chapter 7 relief.

The most common one that I see in my practice is a mortgage. If you are behind on your mortgage, Chapter 13 will allow you to cure those debts, maintain your regular mortgage payments, and sometimes apply for loss mitigation or loan modification throughout the case.

Next are alimony and child support. These debts are not dischargeable. But, if you are behind on child support or alimony, you can use a Chapter 13 plan to catch up while avoiding garnishments, levies, and other unpleasantness your ex-spouse might try to put you through.

Furthermore, no one wants to think about this, but taxes that cannot be otherwise discharged can be paid through a Chapter 13 plan.

Have More Questions? Reach Out Today!

A bankruptcy attorney is best suited to advise as to which bankruptcy can help you most. Moreover, an attorney can explain the differences and help you choose the correct bankruptcy chapter.

The video below discusses more issues that can lead to Chapter 13 cases. If you have other questions about bankruptcy, you can check out my blog or our YouTube channel. I am Scott Goldstein of Law Offices of Wenarsky & Goldstein, LLC.

Give us a call; we will be happy to discuss your case.

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