Even when you have a healthy, steady source of income, it’s still possible to end up with overwhelming debts that you can’t afford to pay.
While a Chapter 7 bankruptcy offers a faster resolution for your financial problems, not everybody qualifies for Chapter 7 – and it’s not right for every person’s needs even when they do. In fact, there are some major advantages to filing for Chapter 13 bankruptcy that you may want to consider if you’re struggling financially.
You can stop all creditor harassment and collection efforts
A Chapter 13 bankruptcy is a debt reorganization plan that allows you to make one consolidated payment that is custom-tailored to your income and expenses. The payment goes to the bankruptcy trustee, who will then disperse them to your creditors according to the plan – and your creditors largely have no choice but to accept. They may not continue to pursue collection efforts against you during this time.
Your remaining debts will usually be discharged at the end
At the end of three to five years, all of your remaining unsecured debts (with limited exceptions) provided for in the plan will be discharged, so your creditors will no longer be able to collect on any of those bills.
You can protect your home from foreclosure and your vehicles from repossession
One of the biggest advantages of a Chapter 13 bankruptcy is that it can allow you to protect your home and vehicles by “curing” your past due mortgage or vehicle loan payments during your bankruptcy period (without incurring further penalties or interest). You may also avoid having to give up certain assets so that they can be liquidated to repay your debts, which can happen in a Chapter 7 bankruptcy.
Your co-debtors will also be protected from collection efforts
If your parents, adult children or best friend cosigned on a loan, mortgage or credit card for you, your failure to pay those debts could lead to financial difficulties for them. A Chapter 7 bankruptcy offers them no protection from collection efforts, but creditors are forbidden from pursuing co-debtors during Chapter 13 proceedings.
If your bills are stacking up and creditors are getting increasingly demanding, filing for bankruptcy under Chapter 13 of the Bankruptcy Code may provide a solution and help you get your finances back on track.