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When is Chapter 13 bankruptcy your last resort?

 

Even though you can file for chapter 7 bankruptcy, there are certain circumstances while filing for chapter 13 bankruptcy may be more beneficial than filing for Chapter 7 bankruptcy.

Gain on a car loan and mortgage in Chapter 13

In Chapter 13 bankruptcy, you are allowed to make up for the missed payments over a period of time and keep the car or home, something is not possible in Chapter 7 bankruptcy. Making up for the missed mortgage payments is only possible in Chapter 13 bankruptcy.

Repay domestic support debts and nondischargeable tax in Chapter 13 bankruptcy

You will be able to use Chapter 13 privileges to pay those debts in full over 3-5 years.

Repay other debts over time in Chapter 13 bankruptcy

When you are having creditors coming at you for your property and salaries, it gets difficult to keep a shed over your head when paying off your debts. With the security of bankruptcy court, you will have a better opportunity of accomplishing both. The automatic stay prevents creditor actions when you pay off the debt over 3-5 years’ repayment plan.

Protect your codebtor on personal debt

If you have filed for Chapter 7 bankruptcy, but the codebtor will yet be on the hook, and your creditor is not going to stop going after them for the repayment. By contrast, if you’ve filed for Chapter 13, the lender will most likely leave the codebtor alone, as long as you keep up with the repayments.

Filing chapter 13 when you cannot meet chapter 7 requirements

Some bankruptcy filers can’t file Chapter 7 bankruptcy, because they failed the Means Test. Chapter 13 remains as their only last resort. This is the case if both of the following are true:

The monthly income of your recent six months before your bankruptcy filing date is more than the median income for a family of your size in your state.

Your disposable income, after deducting monthly payments for debts and certain expenses you’d have to pay off in chapter 13, exceeds some limits preset by the state law. These calculations happen to be referred to as ‘Means Test.’ They decide whether you hold the means to pay off a certain amount of your financial liabilities through a chapter 13 repayment plan. In case you do, you fail the test and are not eligible for chapter 7 bankruptcy filing.

Recovery Law Group – an experienced and most respected group of bankruptcy lawyers and services, can help you decide which chapter is right for you.

Call them on: +1 888-297-6203.

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Location: Los Angeles, CA, USA

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