People considering personal bankruptcy have to make a very important decision before they ever file their initial paperwork. They need to choose what type of bankruptcy they’re going to pursue.
Individuals usually choose between Chapter 7 bankruptcy and Chapter 13 proceedings unless they also own a business. Chapter 13 bankruptcy sometimes doesn’t receive the respect and consideration it deserves because people don’t recognize how beneficial it can be.
What benefits do filers usually derive from a Chapter 13 bankruptcy filing?
An easier time qualifying
Only certain people qualify for Chapter 7 bankruptcy proceedings. The person filing for bankruptcy needs to perform a means test to determine if they are eligible. If someone’s income is above average, they very likely cannot pursue a Chapter 7 bankruptcy. One of the biggest benefits of Chapter 13 bankruptcy is how it is accessible to people in most financial circumstances, including those who have achieved career success and those who have valuable property they do not want to liquidate.
Protection for personal property
A Chapter 7 bankruptcy could potentially lead to the courts liquidating certain assets to repay creditors. But, there is no need to review exemption options in a Chapter 13 bankruptcy. Regardless of how much valuable property someone may have accumulated, they can file for bankruptcy without endangering those resources.
Less damage to creditor relationships
Most people who file for bankruptcy hope to rebuild their financial circumstances as quickly as possible afterward. They may even hope to do business with the same banks and creditors again. Chapter 13 bankruptcy involves a repayment plan that reduces the total amount of debt someone discharges. Making a good faith effort to fulfill financial obligations to creditors may help preserve a better working relationship with them and make it more likely for someone to qualify for loans and lines of credit in the future.
An automatic stay
Anyone facing aggressive collection activity can stave off creditor lawsuits and end abusive calls when they file for bankruptcy. The courts grant an automatic stay at the time of filing that prevents collection activity until someone resolves their bankruptcy case.
If someone’s bankruptcy filing is successful, they can discharge the remaining balances on their eligible debts after they complete their repayment plan.
Overall, there are many benefits available to those who file for Chapter 13 bankruptcy. Learning more about the different bankruptcy options can help people make the right choices given their current financial struggles.