Many debtors considering bankruptcy prefer Chapter 7 bankruptcy ; but there are times when filing a Chapter 13 bankruptcy is a much better option.
- 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.
- 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.
- If you have assets which may be seized in Chapter 7 bankruptcy, filing Chapter 13 bankruptcy may help you protect those assets from creditors.
- 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:
- 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.
- 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.
- 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.