The Benefits of a Chapter 13 Bankruptcy Over a Chapter 7 Bankruptcy

Posted on: 13 March 2019

When it comes to filing personal bankruptcy, many people believe that filing a Chapter 7 is better than filing a Chapter 13. In a Chapter 7 bankruptcy, your debt that qualifies is wiped out and you don't have to pay it back. In a Chapter 13 bankruptcy, you will establish a repayment plan and you are responsible for paying off some of the debt you owe. Although it seems like an easy decision, there are times when debtors aren't able to file for Chapter 7 because monthly income levels are too high and disposable income amounts make you ineligible. In general, if it is discovered that you have the ability to pay back your debt, you can't file a Chapter 7.

Understanding Median Income Levels

Median income levels are established to determine if you have the ability to pay back your debts. You can't file a Chapter 7 bankruptcy if your monthly income for the six months prior to filing the petition is larger than the median income established in your state for your size of household. In addition, if you have enough disposable income to pay back your debt, you will have to file a Chapter 13 petition instead to restructure your debt and pay some of it back.

When You Want to Keep Property

If you are late paying your mortgage or car payments, it is better to file a Chapter 13 bankruptcy. It allows you to keep your property and make up the payments you are behind. This is not allowed during a Chapter 7 bankruptcy, and you have a high risk of losing your home and car. If you are tired of collection agencies calling your home or trying to attach your wages, a Chapter 13 bankruptcy can provide you with the protection you need.

Get a Stay in Place

Once you file a Chapter 13 bankruptcy, you have some time to figure out your finances. Your car can't be repossessed, your bank account can't be levied, and your wages can't be garnished with a stay in place. This gives you time to work with your creditors and establish a repayment plan for your debts.

If you are not familiar with filing bankruptcy, it's important to know the difference between Chapter 13 and Chapter 7. In general, if you are ineligible for a Chapter 7 bankruptcy, you can still get the protections of a bankruptcy stay through a Chapter 13 petition. For more information about bankruptcy, contact a law firm like Haven Law Group, P.C.