Filing bankruptcy can relieve you of the pressures of debt, but there is a lot to consider before trying to declare bankruptcy. Many creditors work with debtors to alleviate some of the pressure. Many people talk to their creditors before looking into filing either Chapter 13 bankruptcy or Chapter 7 bankruptcy. In certain cases, creditors will lower payments to ensure they get their money, but this might not be enough. You may find yourself in a situation where bankruptcy looks like the best option.
Why Choose Chapter 13 Bankruptcy Over Chapter 7 Bankruptcy?
Chapter 13 bankruptcy works more as a repayment plan than Chapter 7 bankruptcy. If you have too large of an income or if your debts are not high enough, you may only qualify for Chapter 13. If you are a business owner and filing as an individual (not on the business’ behalf), you are eligible for Chapter 13 bankruptcy. Chapter 13 differs from Chapter 7 because you not only repay most of your unsecured debt but also get to keep nonexempt property that you would have to forfeit under Chapter 7 bankruptcy.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a repayment plan in which the debtor must use all disposable income to make payments on his debts. Bankruptcy law considers disposable income to be any income remaining after the debtor pays living expenses, priority debts (such as child support and taxes), and secured debts (mortgages and car loans). The court must approve all Chapter 13 bankruptcy repayment plans before the debtor qualifies for bankruptcy.
Chapter 13 bankruptcy allows the debtor to alleviate some of the pressure of debt without liquidating all of his assets. This form of bankruptcy also allows a debtor to manage his payments without hurting cosigners on his debt. Since Chapter 7 bankruptcy cannot discharge tax and student loan debt, Chapter 13 bankruptcy is a smarter choice for those with large student loan debts. These are general guidelines, and it is wise to consult one of RGG Law’s bankruptcy lawyers before deciding on which chapter of bankruptcy to file.
If you or a loved one is determining whether or not to file bankruptcy, feel free to reach out to one of the bankruptcy lawyers at RGG Law. Our attorneys thoroughly understand bankruptcy law, and they would love to take the time to help you. If you have further questions about either form of bankruptcy, contact RGG Law for a free consultation.