Using bankruptcy to help you gain a fresh start with your finances is one option you have, but there are two main branches to choose from. A lot of people feel that Chapter 7 is the best option, because it eliminates debts; however, there are several things that Chapter 13 can do that Chapter 7 cannot. Here are three of the main things.
Help You Stop a Foreclosure
If your mortgage lender has started the foreclosure process on your house, using Chapter 7 to save your home is probably not going to work. Chapter 7 can postpone a foreclosure, but it cannot stop it completely.
If you want to save your home through bankruptcy, your lawyer will recommend using Chapter 13. With this option, you will be placed on a repayment plan that allows you time to repay your past-due mortgage balance, and this will put a complete stop to the foreclosure. If you make your payments as scheduled, you will not lose your home.
Allow You to Keep All Your Assets
Chapter 7 bankruptcy is a great tool if you need to get rid of credit card debts, but it can also cause you to lose assets you have. In Chapter 13, you will not lose your assets. You can keep everything you own in most cases, and this is not the case with Chapter 7. If you have things you own that are valuable, you should choose Chapter 13 if you want to keep these items.
Give You Time to Repay Non-Qualifying Debts
The other huge benefit of Chapter 13 is that it gives you three to five years to pay off debts you have that would not be discharged (or eliminated) in Chapter 7. Child support is a great example of a debt you could repay during your repayment plan in Chapter 13. Bankruptcy never forgives child support, and Chapter 7 offers no way to catch up on past-due debts. If you choose Chapter 13, you could include this in your repayment plan, and this would give you years to repay any past-due balance you owe for this.
There are times when Chapter 7 might offer more advantages for a person than Chapter 13, but there are also times when Chapter 13 is more advantageous. If you are considering bankruptcy, talk to a lawyer like David S. Riehl, Attorney At Law to find out which branch would be the best option for your personal situation.