Bankruptcy can help people in many different situations, and there are different forms of bankruptcy that work better in specific circumstances. Your situation largely dictates the best options when it comes to the chapter of bankruptcy you file.
Many people only know about Chapter 7 or liquidation bankruptcy and have very little familiarity with the details of a Chapter 13 bankruptcy proceeding. When you understand the differences between Chapter 7 and Chapter 13 bankruptcies, it can be easier for you to choose the option that better protects you in your current situation.
Chapter 13 bankruptcy does not require asset liquidation
Chapter 7 bankruptcies require that the person filing provide the courts with a thorough list of all of their property and debts.
The trustee assigned to their filing uses that information to decide if they have to sell any of their property to pay off their creditors before the courts will grant a discharge of their remaining unsecured debts.
Chapter 13 bankruptcy does not require the liquidation or sale of any of your personal property, so you don’t have to worry about what you can exempt and what you might lose when you file.
Chapter 13 bankruptcy takes longer
Depending on the volume of cases going through the courts and the overall amount of debts and assets involved, a Chapter 7 bankruptcy can result in a discharge in several months. In a Chapter 13 bankruptcy, there is a repayment plan involved.
This means that there will be at least three years of monthly payments, if not more, that someone will have to make between when they file and when the courts grant their discharge.
Chapter 13 bankruptcy is accessible to more people
The means test required for Chapter 7 bankruptcy prevents anyone with higher-than-average income from qualifying. Chapter 13 bankruptcy does have income limits and also limits on the total debt involved, but it can offer protection for successful professionals and business owners with higher-than-average income.
For those with more assets or stable income, Chapter 13 Bankruptcy is sometimes the better option. Learning more about what makes Chapter 13 bankruptcy beneficial for certain people can help you decide if it is the right solution for you.