Chapter 13 bankruptcy is another bankruptcy form that helps in exiting dire financial situations. Chapter 13 is an attempt to repay the maximum portion of debt possible through a consistent income source over a period of 3-5 years. This isn’t the most common bankruptcy form as almost 70% of the bankruptcy filers prefer Chapter 7. So, why do we even have Chapter 13, and is it even beneficial sometimes?
Chapter 13 benefits and hardships
Chapter 7 allows for a discharge of debts especially the unsecured ones fully. Chapter 13 bankruptcy is a promise to continue hardship and payout as much debt as possible with a new more viable or practical payment plan. Some debts might get discharged but it isn’t going to be as Chapter 7. The two most common reasons to opt for Chapter 13 can be-
- Not eligible – The majority of Chapter 13 filers have opted or have been forced to consider Chapter 13 because they are not eligible for Chapter 7. The misuse of Chapter 7 to discharge debts had prompted lawmakers to add an additional clause for eligibility in Chapter 7, which might make a lot of filers ineligible. People above a certain state median might not be able to file Chapter 7. However, if you want to have your income analyzed to qualify for Chapter 7, just log on to https://recoverylawgroup.com/bankruptcy/ to get exceptional tips on how to calculate your household income for the means test.
- Need to safeguard assets at any cost – The second reason could be to safeguard a maximum number of assets. Chapter 7 results in the liquidation of assets and Chapter 13 are a lien on the future income of the borrower to evade assets from the lenders. Sometimes, it is essential to safeguard an asset like a car or a rental property, that generates income and is hard to rebuild due to emotional and monetary value, hence Chapter 13 becomes the only roll of a dice in this situation.
Chapter 13 vs Chapter 7 can be a difficult choice. Making the right move is critical in dire financial situations. Los Angeles & Dallas, TX residents can dial 888-297-6203 and avail of professional help instantly.