Should you walk away from critical assets such as a home and file Chapter 7 bankruptcy ? Or, should you file Chapter 13 bankruptcy and repay the delinquent mortgage so that you can hold onto the asset? In the end it is a question of whether you want to get your bankruptcy fresh start now or later. When a debtor files Chapter 7 bankruptcy, their debts are discharged and they can start anew within a few months of filing the bankruptcy petition. This can be beneficial for those who have no assets or who have assets such as a car or house which they may want to surrender to the lender.
On the other hand, when a debtor files Chapter 13 bankruptcy, they will need to wait three to five years before they can receive a discharge and they must repay some or all of their debts through the bankruptcy court. While the wait for the bankruptcy discharge is longer in Chapter 13 bankruptcy, this chapter has its own set of benefits.
Let’s take a look at a few questions a debtor should ask themselves when deciding if they want their bankruptcy discharge now or later:
- Do you have assets attached to a loan which you want to keep? For example, if you family home has a mortgage which is delinquent or in default and you want to keep that home, you may prefer to file Chapter 13 bankruptcy. If you don’t want to keep the home or other asset, then filing Chapter 7 bankruptcy may work for you.
- Do you have a lot of undischargeable debt? Debtors with undischargeable taxes or other debts which are delinquent may want to use Chapter 13 bankruptcy so that they can get time to catch up on their payments.
- Do you have the income to service a Chapter 13 bankruptcy plan? If you have assets you want to keep in bankruptcy which are attached to a loan, you will still need to have enough income to service a Chapter 13 bankruptcy over the course of three to five years.