Chapter 7 bankruptcy and Chapter 13 bankruptcy are both commonly used by people who are struggling with major financial problems, and many people prefer the first over the second. There are also times, though, when Chapter 13 is the more advantageous one for people to file; here are some of the situations in which this is true.
A person is facing foreclosure
When foreclosure is in the picture, the only branch of bankruptcy that will help is Chapter 13. With Chapter 7, you can get a little extra time to try to catch up on your mortgage loan payments and past-due balance, but it will not stop the foreclosure. Chapter 13 is the best choice for stopping a foreclosure dead in its tracks. Once you file and send in the paperwork to the bankruptcy court, you will get to keep your house. Now, you will have responsibilities in this, which will include making payments to the court for three to five years, but this is often just what people need to get a fresh start with their finances.
A person's debts do not qualify for discharge
Secondly, when a person has debts that will not qualify for a discharge, it often makes no sense to use Chapter 7. Instead, using Chapter 13 is the better choice, as it will offer a way to spread out the payments over three to five years. At the end of the three to five years, a person is often all caught up on payments and may even be debt-free.
A person cannot qualify for Chapter 7
People often choose Chapter 13 too because they cannot qualify for Chapter 7. The main reason a person would not qualify for Chapter 7 is that they make too much money. Qualifying for Chapter 7 requires earning less income than the average person in your state. If you make more than this, you cannot use Chapter 7, but you can use Chapter 13.
A person has a lot of assets
The other situation to consider is that when you file for Chapter 7, you take the risk of losing assets. Therefore, when people have a lot of assets, they can protect them by choosing Chapter 13 bankruptcy instead of Chapter 7.
If you want to find out which option would offer the best results for you, go online to read more about bankruptcy law firms and to schedule a consultation visit with a bankruptcy lawyer.