Is A Chapter 13 Bankruptcy Filing The Best Option For You?

After making the decision to file for bankruptcy, you have to decide whether filing Chapter 7 or 13 is best for you. Chapter 7 might seem like the best option because you are not tasked with paying back your debts, but in some instances, filing for a Chapter 13 is the best option. If you are unsure whether or not filing for Chapter 13 is best, here are some scenarios in which you should consider it. 

The Exemptions Are Not Enough

Each state has exemptions that bankruptcy filers can use to protect their assets. The exemptions allow filers to keep possession of assets up to a certain dollar amount. Previous filers have used the exemptions to help save their homes, cars, and bank accounts. 

Unfortunately, the exemption amount might not be enough to cover all of the assets you want to keep. If it is not, the bankruptcy trustee could seize those unprotected assets and sell them to pay towards the debts you owe. 

However, if you file for Chapter 13, you can keep your assets.  In this filing, you are working to repay your debts within a period of time. As long as you are making your payments on time, your possessions are safe. 

Most of Your Debts Are Non-Dischargeable Debts

The federal government dictates which debts can be discharged in a bankruptcy. For instance, the debt on a home or credit card would most likely be discharged. However, there are some debts that cannot be removed through a bankruptcy filing. 

Non-dischargeable debts are those designated by the federal government that would be in the interest of the public for you to pay. For instance, child support, tax debts, and student loans would be considered non-dischargeable. 

If you file for Chapter 13 protection, you would still be responsible for these debts, but those payments can be factored into your repayment plan. As part of your repayment plan, the trustee would be responsible for making the payments to the creditors for you. As a result, your payments would be caught up, which could help towards rebuilding your credit.

By contrast, if you file for Chapter 7, you would still be tasked with attempting to catch up those payments or making arrangements with the creditors yourself.

There are several other instances in which filing for Chapter 13 bankruptcy would be best for you. Consult with a bankruptcy attorney,, to assess whether or not any of those situations apply to you and to receive help with filing.