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When Is A Chapter 13 Bankruptcy Preferred Over Chapter 7 Bankruptcy?

Posted By admin || 3-Oct-2010

Many debtors considering bankruptcy prefer Chapter 7 bankruptcy ; but there are times when filing a Chapter 13 bankruptcy is a much better option.

  1. Filing Chapter 13 bankruptcy is beneficial for debtors when they have steady income, want to pay their debts; but want the protections and time that the bankruptcy court offers.
  2. Filing Chapter 13 bankruptcy is beneficial for debtors when they owe tax debts that cannot be discharged in Chapter 7 bankruptcy.  Although some taxes can be discharged in Chapter 7 bankruptcy, if they are recent taxes you may need to repay them and doing so in Chapter 13 bankruptcy could be beneficial.
  3. If you have assets which may be seized in Chapter 7 bankruptcy, filing Chapter 13 bankruptcy may help you protect those assets from creditors.
  4. If you filed Chapter 7 bankruptcy within the past 8 years, then you are prohibited from filing Chapter 7 bankruptcy again and may need to file Chapter 13 bankruptcy instead.

Other benefits of Chapter 13 bankruptcy include:

  1. Chapter 13 bankruptcy's power to stop interest fees and penalties from being added to your debt within a bankruptcy repayment plan.  If a debtor has credit cards and other debts with high interest rates, then filing Chapter 13 bankruptcy and repaying those debts over 3 to 5 years could save them lots of money in interest.
  2. Chapter 13 bankruptcy has the same benefits of the automatic stay as Chapter 7 bankruptcy.  Creditors cannot sue or garnish the wages of a debtor in Chapter 13 bankruptcy and if they do so, they can be sanctioned by the court or even sued by the debtor.
  3. If the debtor has not paid all of their debts at the end of the 3 to 5 year period in Chapter 13 bankruptcy, then the court will discharge the remaining unsecured debt.
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