Not only is the decision to file bankruptcy a difficult one, so is choosing the right type of bankruptcy for your situation. For many people who are eligible for a Chapter 7 bankruptcy, the idea of having all of your unsecured debt erased might sound like a dream come true. However, a Chapter 7 bankruptcy may not be the right choice for many individuals facing financial difficulties. Here are some indicators that a Chapter 13 bankruptcy may be a better option to bring you financial relief.
You Have a Great Deal of Secured Debt
If the far majority of your debt is secured and cannot be discharged under a Chapter 7, you may want to consider the structured repayment plan that a Chapter 13 offers. For example, if you have tax debt or student loan debt that won’t be discharged, you can file a Chapter 13 and have those debts included. With a Chapter 13 bankruptcy, your payments will only be what the court determines you can afford by evaluating your debt to income ratio. That means, a Chapter 13 bankruptcy may lower the payments and give you more time to pay.
You Have Significant Assets That You Want to Keep
While most assets considered necessary for day-to-day living — like your car and house — are not liquidated in a Chapter 7 bankruptcy, other assets that are considered non-exempt will be. If you have assets that you want to keep that would normally be discharged under a Chapter 7 bankruptcy, a Chapter 13 may be a better option for you. This is particularly true if your assets have sentimental value. The court won’t look at whether or not an asset means something to you, they will simply look at whether it is or is not on the list of exempt assets. If it isn’t, it will be liquidated in order to pay off your debts in a Chapter 7.
You Owe Debt With Someone Else
If you have a co-debtor, a Chapter 7 bankruptcy will only release you from your portion of the debt and collection efforts will still continue for your co-debtor. However, if you file a Chapter 13 bankruptcy, a creditor must cease all collection activity while you are making your bankruptcy payments.
Have More Questions About a Chapter 13 vs. a Chapter 7 Bankruptcy? Call Us!
At the Beecher & Conniff Law Office, we can help you determine what type of bankruptcy is right for you. Call now at 253-627-0132.