When Is Chapter 13 Bankruptcy Better than Chapter 7 Bankruptcy?

If you have excessive debts and property you want to protect from seizure, filing for Chapter 13 bankruptcy is an option you may want to consider. Chapter 13 bankruptcy allows you to keep important assets after completing a payment plan. These assets include your home, vehicle and other secured debts. While Chapter 7 bankruptcy does have exemptions (depending on your state), you may find that you can keep more assets by choosing Chapter 13 bankruptcy.

Whether Chapter 13 bankruptcy is the right choice for you depends on other factors. Chapter 13 bankruptcy requires you to have a source of income. In addition, your unsecured debts must be less than $394,725 and secured debts less than $1,184,200.

However, there is an important catch when it comes to Chapter 13 bankruptcy. You must complete a three to five-year payment plan. This payment plan restructures your debts and requires you to make a single payment to the trustee each month.

Are There Advantages and Disadvantages to Filing for Chapter 13 Bankruptcy?

Some people do not complete their repayment plans, so it is important to discuss payment strategies with your attorney. Studies have suggested setting up automatic payments can increase the chances of following through on Chapter 13 payments. It is essential to receive a discharge on your cumbersome debts, otherwise you will lose out on the benefits of Chapter 13 bankruptcy.

Chapter 13 bankruptcy also has other advantages for homeowners with underwater mortgages or vehicles. The 506 cramdown allows filers to reduce the amount they own on vehicles upon completing their repayment plans. Depending on the circumstances, it may be possible to strip secondary mortgages on homes.

The Kansas City bankruptcy attorneys at The Sader Law Firm offer $0 up-front Chapter 13 filing options. To learn more about this option, please visit our website.