Is Chapter 13 Bankruptcy Right For Me?

The difference between chapter 7 and chapter 13 bankruptcies and how to decide which one is right for you.

s there life after bankruptcy? That is the question many people ponder as they debate declaring bankruptcy. There are a few different types of bankruptcy so you should consider your options and get some facts before you decide.

Chapter 13 bankruptcy should really be considered more of payment plan than a discharge since you are not really asking any of your creditors to forgive a debt and you are not really planning on walking away from any of your financial responsibilities or losing any of your assets.

The best way to understand what a chapter 13 bankruptcy is to understand what it isn’t. It isn’t a chapter 7 bankruptcy which is the most common discharge filing. This type of filing is generally done by people who have more debt than ability to pay and that can be the result of medical bills, credit card spending, losing a job or a combination of all of the above. Once a person finds themselves unable to pay their debts and their financial circumstances would seem to lend themselves to being pretty grim, outlook wise the best course of action can be to ask the federal court to discharge the debt, sell any assets of value with a long slew of exceptions to that list, and move forward with a fresh slate.

A chapter 13 bankruptcy is if anything the opposite of this. In this type of federal filing, the person is not asking for a discharge of their debts. The only way this type of bankruptcy can be approved by the court in fact is if the person who is filing has a steady income and the ability to resume paying for their debts. The repayment plan worked out will generally reduce or terminate late charges, interest and fees, and allow the person to begin paying for their debts at a reduced by steady rate. The biggest problem with a chapter 13 bankruptcy in fact is the forgiveness factor. There isn’t one. You cannot miss one single payment on your repayment plan or be late with a payment or the entire chapter 13 can be terminated by your creditors.

That is why this type of discharge can only be done by a select group of individuals. People, who have the ability to recover because they have the steady income again, and who want to keep their assets, are the ideal candidate for this type of filing.
If you begin a chapter 13 bankruptcy and are unable to complete it, the next option is a chapter 7, which as you recall means you will likely loose assets but will be able to walk away from the debt as well.

If you feel you may be a good candidate for either type of bankruptcy, your first step is to consult a bankruptcy attorney and find out about how this will affect your future credit and if it truly is the right option for you.

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