What are the benefits of filing chapter 13 bankruptcy vs Chapter 7 bankruptcy?

Chapter 13 and Chapter 7 bankruptcies are very different. They are designed for different types of debtors in different situations. Not many people understand what Chapter 13 bankruptcies can really do for people deep in debt. Here are the benefits of filing for Chapter 13 bankruptcy instead of Chapter 7:

Qualifying Is Easier With Higher Incomes

One benefit of filing a Chapter 13 bankruptcy is that it is easier to qualify for Chapter 13 bankruptcy with a higher income. The means test for Chapter 7 bankruptcy requires filers to have an income that is below the median income for the state where they live. This means someone making just a little too much will be ineligible. Chapter 13 does not have the same low limit for income.

Maintain Good Relationships with Creditors

Chapter 13 bankruptcy can help people to maintain good relationships with creditors. Some or all of the debt will be paid back to the creditors over time. This can make it much easier to use the services of those creditors again in the future such as getting a credit card or signing up for a utility service.

Stop Foreclosure and Repossessions

Although a Chapter 7 and a Chapter 13 bankruptcy foreclosures and repossessions, only a Chapter 13 bankruptcy can guarantee that, if you can propose a feasible repayment plan, you can keep your car and your house. It is not a given that a debtor will be able to keep their car or house in a Chapter 7, especially if they are behind on their payments. In a Chapter 13 the foreclosure or repossession will stop right away and the debtor will have a chance to reorganize their debt as part of the bankruptcy.

Keep Nonexempt Property

Nonexempt property is usually sold to repay creditors under Chapter 7 bankruptcy. This is not the case with Chapter 13. It is possible that the person filing will be able to keep all nonexempt property. This makes it easier to continue living a normal life while paying down creditors without having to lose key assets.