Most people filing bankruptcy prefer to file under chapter 7.  However, the Chapter 13 bankruptcy offers many benefits that the Chapter 7 does not. 

The Wage Earners Plan for Debt Reduction
The Chapter 13 bankruptcy is often referred to as the “wage earners plan” or the “re-organization” because the debtor pays back a portion of their debt based on their income level.  One of the main reasons to file a chapter 13 bankruptcy would be to stop a foreclosure sale on the debtor’s home. The chapter 13 bankruptcy can place the debtor on a repayment plan that reduces or eliminates interest and penalties for certain tax debts.

The chapter 13 bankruptcy can cram-down the amount owed on certain secured debt such as automobiles and furniture.  Basically, in a chapter 13 bankruptcy the debtor pays back a percentage of his/her debt. The debtor in most cases receives a substantial discount on the debt in the chapter 13 repayment plan. 

Chapter 13 Bankruptcy Stops the Harassment
In a chapter 13 bankruptcy the automatic stay prevents creditors from making harassing phone calls, garnishments, judgments, repossessions, foreclosures and more.

Once the automatic stay goes into effect, stopping all collection activity, the debtor is given an opportunity, typically up to five years to pay back a percentage of the debt, with no creditor harassment.

Often times, people will file a chapter 13 bankruptcy because they are not eligible to file a chapter 7.  Debtors are sometimes disqualified from filing a chapter 7 because they have filed a chapter 7 in the past eight years or because they make too much money to file a chapter 7.  Even if a debtor is disqualified from filing a chapter 7, he or she may still be eligible for the protections of the bankruptcy court in a Chapter 13 reorganization.    

Weighing to FIle Chapter 7 or 13 Bankruptcy
Another reason to file a chapter 13 bankruptcy is because in some chapter 7 bankruptcies the debtor may lose certain assets.  For example, if a chapter 7 debtor has too much unprotected equity in their home, the Chapter 7 trustee may take the home and sell it for the benefit of the debtor’s creditors.  The debtor can avoid their home being sold by the Chapter 7 Trustee by filing a Chapter 13 bankruptcy.  The chapter 13 trustee does not sell the debtor’s possessions in the chapter 13 bankruptcy.

If you believe that a bankruptcy may be able to help you reorganize your debt, please call 757-896-0868 to meet with one of our experienced bankruptcy lawyers for a FREE CONSULTATION