When To Choose Chapter 13 Bankruptcy

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June 29, 2011
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When To Choose Chapter 13 Bankruptcy

When it comes to debt relief solutions, there are many options people can choose from.  When possible, people should try to repay their debts in full to avoid potential problems with their credit standing. However, with the economy continuing to fight against further downturn and the increasing debt burden on families, meeting the repayment deadlines creditors demand may not be possible. Many people don’t act until it is too late, and face losing their home and personal property to creditors. Bankruptcy is one option that can provide people experiencing financial hardships a way to get relief from their debts while protecting their home and property. But which type of bankruptcy is best for you?

Chapter 13 vs Chapter 7 Bankruptcy

A Chapter 7 bankruptcy can provide you with relief from credit collections while the bankruptcy court processes the case to determine if your debts will be eliminated. If the bankruptcy court grants you a discharge, your debts are eliminated and you are no longer responsible for repaying your creditors. However, filing for Chapter 7 bankruptcy protection is typically reserved for those that cannot afford to make payments towards their debts.  In order to qualify for a Chapter 7 bankruptcy, you must pass a means test, which determines if your debts exceed your income enough to prevent you from being able to repay your debts. If you file for Chapter 7 bankruptcy and do not qualify, you may be able to file for Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, your debts are reorganized and a repayment plan is developed and presented to your creditors. If the bankruptcy court approves your repayment plan, you will be granted an extended period of time to repay your debts to creditors. A Chapter 13 plan provides more manageable payment terms as you will have 3 to 5 years to repay your debts to creditors.

Advantages of Chapter 13 Bankruptcy

A Chapter 13 bankruptcy will appear more favorable on your credit standing as you will be repaying your debts rather than having them erased. Potential creditors will be more likely to provide you with a loan if it is shown that you repaid your debts and did not just walk away from them. Your debts are your responsibility and having made efforts to repay your loan, even through a Chapter 13 bankruptcy, will present you in a positive light.

A Chapter 13 bankruptcy is able to protect your assets more than a Chapter 7 bankruptcy, where there is no guarantee your assets will be protected from liquidation by creditors.  Texas is one state that provides some exemptions of your personal property from liquidation during bankruptcy; however, there are limits to how much and what kinds of your assets are protected under these exemptions. Because you are repaying your debts in Chapter 13 bankruptcy, your assets will be protected from liquidation and remain in your possession once you complete the Chapter 13 repayment plan.

Bankruptcy laws prohibit some debts, such as back taxes or student loans, from being discharged in a Chapter 7 bankruptcy. A Chapter 13 bankruptcy can afford you the opportunity to repay these debts as part of your repayment plan, providing you relief from debt while avoiding potential legal action.

A Chapter 13 bankruptcy may benefit someone that has debts on a co-signed loan. If you file for Chapter 7 bankruptcy protection with a co-signed loan and receive a discharge of your debt, the co-signer has not been granted the same discharge and can be held solely responsible for loan repayment by the creditor. Filing for Chapter 13 bankruptcy with a co-signed loan will protect the co-signer from creditors and liability, while payments are made towards the loan.  The benefits and risks associated with each type of bankruptcy may differ for each individual, it is best to consult with an experienced bankruptcy attorney to determine which bankruptcy is best for you.

For more information please visit http://leebankruptcy.com

Christopher understands that financial hardships can affect honest, hard-working people. Growing up in a very blue collar family and rural area of Indiana , money didn’t always come easy for his parents. The struggles his family faced in his childhood made a significant impression on his business philosophy today. As a Fort Worth bankruptcy attorney this practice has given me the opportunity to directly impact the lives of many people. For more information please visit http://leebankruptcy.com
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