When your financial situation gets over your head, you start looking for solutions. While bankruptcy may feel like a last resort, it is the solution that around 800,000 Americans choose to resolve their situation each year. Most people think of Chapter 7 bankruptcy as the better option because of its reputation as a debt write-off, but that’s not necessarily the case. Filing for Chapter 13 bankruptcy can be more advantageous.
You Want to Pay Your Debts
If you’re one of those good-hearted people that feels responsible to pay back your debts, but needs protection from creditors to accomplish your goal, then Chapter 13 bankruptcy is an excellent way to do that. In Chapter 13, you will be put on a three or five-year repayment plan. The five-year plan is required if your income exceeds the median income level in your state. A three-year plan can be requested if your income is below the median level.
In this plan, you’ll be required to repay secured and priority debts first (such as tax debts, school loans, child support, alimony, home mortgages, and car loans). After that, you will be required to put your disposable income toward repaying your unsecured debt. A Chapter 13 plan will hold you accountable.
You’re Behind on a Loan
If you’ve fallen behind on your mortgage or car payments and want to make up your missed payments, then Chapter 13 bankruptcy can help you do that. With Chapter 13, you can protect your home from foreclosure and your car from repossession. So if you’ve fallen on hard times—for instance, because of a job loss or a health situation—and your bank is refusing to work out a plan for returning to your original agreement, a Chapter 13 arrangement will put an automatic stay in place and create a path back to solvency.
You Want to Keep Your Property
Under Chapter 7, all of your nonexempt property is taken to help with repayment of your debts. Nonexempt property includes such things like a car that’s over a certain value, a second car or home, cash and investments, expensive musical instruments, hobby collections, family heirlooms, and expensive jewelry. Chapter 13 only uses your income to repay debt and does not require you to sell property. Obviously, if you want to keep the antique bureau that you had passed down from your granny, a Chapter 13 bankruptcy is your best option.
You Have a Codebtor
If you share a debt with another party and you default on your part of the debt, creditors will go after your codebtor. However, if you file Chapter 13 and establish a repayment plan, creditors will be more likely to leave your cosigner alone.
When you’re considering bankruptcy, make sure you have a skilled Chapter 13 bankruptcy attorney on your side. He can help you navigate the complicated legal code of bankruptcy law and help you set up a reasonable payment plan that works for both you and your creditors.