The Advantages of Filing Chapter 13 Bankruptcy
- Chapter 13 bankruptcy offers working debtors a restructured, court-supervised debt repayment plan, notes the United States Bankruptcy Court. In Chapter 13, debtors with consistent income from a job or benefits can partially repay their debts; Chapter 13 offers some people significant advantages over Chapter 7 or "liquidation" bankruptcy. But like any type of bankruptcy, Chapter 13 may not be right for every type of overwhelming financial situation. Debts such as child support, alimony, court fines and most tax bills cannot be reduced or eliminated under any type of bankruptcy including Chapter 13, warns the book "How to File for Chapter 7 Bankruptcy."
- A Chapter 13 bankruptcy case only reports to your credit profiles for seven years from the date of filing, notes the credit reporting agency Experian. This time frame, three years less than that prescribed for Chapter 7, may prove advantageous when it comes to getting new credit in the years following bankruptcy.
- If you file Chapter 13 bankruptcy, you might be allowed to keep your house, notes both the United States Bankruptcy Court and the book "How to File for Chapter 7 Bankruptcy." Also, mortgages and car loans can also at times be restructured so you can catch up missed payments and keep the property that secured the loan. Bank accounts, jewelry, excessive personal property, stocks, real estate and automobiles are all at risk of seizure in a Chapter 7 case. Thus, people with assets usually turn to Chapter 13 for financial relief in times of hardship.
No Collection Activities
- Once you file Chapter 13, creditors can no longer legally contact you to collect debts, notes both the United States Bankruptcy Court and the book "How to File for Chapter 7 Bankruptcy." They also cannot take your car, foreclose upon your house, garnish your wages or sue you in court. Once your local bankruptcy judge approves your proposed repayment plan, your creditors can never contact you again; you pay one monthly bill to your local bankruptcy trustee. You and your family are thus also freed from the potential emotional distress associated with traditional bill-collection techniques including repeated telephone calls.
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- If you file Chapter 7 on loans that another person co-signed, creditors can legally pursue payment from that individual as long as he did not also file bankruptcy, warns the book "How to File for Chapter 7 Bankruptcy." But in Chapter 13, your co-signers aren't at risk, notes the United States Bankruptcy Court. Since you're repaying the debts at least partially under court-supervised terms, your co-signers are legally protected and won't be hassled for any remaining funds owed.