Chapter 13 Bankruptcy: When Is It The Best Choice?

If you've been trying to decide whether you would be better off filing for Chapter 13 or Chapter 7, you should consider contacting a professional in the field and discussing your options with them. They will be able to take a look at your financial situation, your income, your assets, and your goals to decide which route is better for your life. Of course, there's nothing wrong with getting a head start on the process. The more informed you are, the better you can move forward with whatever decision you need to make. Here are some of the reasons you might choose one form of bankruptcy over another.

Stop Collection Activities

While filing for either type of bankruptcy will result in a stay as it pertains to collection activities, only Chapter 13 will put an end to it for the entire filing period (which can last years). With 7, the activity is only stopped for 90 days. If you're experiencing the deleterious effects of aggressive collection (harassing calls, wage garnishment, foreclosure, and more), this might play a big role in determining which route you wish to go. Talk to a good lawyer to determine if this is reason enough for you to choose this form of bankruptcy.

Buy Yourself Time

In many cases, when a homeowner is facing imminent foreclosure, they may feel there is nothing they can do to prevent losing the house. This is seldom true, however. Filing for Chapter 13 may be just what you need to do to keep the home away from the grasp of the lender. In most cases, the program will give you the chance to take up to 5 years to pay back any overdue payments that you have missed due to financial difficulty and put a stop to foreclosure proceedings. The same can be true for those in danger of losing their car to repossession. These options, however, can disappear quickly if you take too long to act.

Too Much Income

Sometimes, choosing Chapter 13 really isn't a choice at all, but rather a necessity. There are certain standards in place that you must meet if you want to qualify for Chapter 7. One of these standards is your level of income, which must not be above the median for your state. If you are over the amount, you will not qualify for that type of filing. Keep in mind that even if your income falls below the median, the court will look at your disposable income and use that as a further test to see if you qualify.