By the time you find yourself considering personal bankruptcy, you are probably quite far behind on your financial obligations. You may have to choose which debts to make payments on when you receive paychecks or choose between making payments and covering basic costs, like groceries.
Bankruptcy may seem like the only viable solution when you have far more debt than you can pay or an unexpected drop in your monthly income. A successful personal bankruptcy filing will stop collection activity and eventually lead to the discharge of certain unsecured debts. There are different forms of bankruptcy available for individuals and businesses in financial distress, and the right form of bankruptcy will differ depending on your circumstances.
Although many people hope to qualify for Chapter 7 bankruptcy, it isn’t always the best solution for someone’s financial hardship. There are benefits to filing for a Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. What are some of the reasons people Chapter 13 bankruptcy?
They can qualify with more income
Chapter 7 bankruptcy is subject to very strict financial limitations. You have to compare your income to the state median for your household size. If you don’t pass the means test, you don’t qualify. Individuals in professional occupations may find that Chapter 13 bankruptcy is an option when they don’t qualify for Chapter 7 bankruptcy.
They can protect more personal property
A Chapter 7 bankruptcy often comes with liquidation requirements. You have to sell some of your property so that you can use the money to pay your creditors. Your most valuable assets could be at risk in a Chapter 7 filing, but there is no obligation to sell off your belongings in a Chapter 13 filing.
You have more of a chance to work with your creditors
A Chapter 13 bankruptcy gives you an opportunity to restructure or reorganize some of your debts. Chapter 13 bankruptcies can be particularly beneficial for individuals who are behind on their mortgage or who may need to restructure a car loan, as lenders are more likely to cooperate during bankruptcy proceedings than during individual attempts at negotiation.
Learning about what makes Chapter 13 bankruptcy different can help you decide if it is the right solution for your financial hardship.