If you have made the decision to file bankruptcy, you may be wondering about which variety of bankruptcy is most beneficial to you. The reality is that, depending on your income, the courts may require you to file a specific type of bankruptcy.
Often, the decision of whether to file Chapter 7 or Chapter 13 bankruptcy is a decision the courts make. According to Credit Karma, if you have a high enough level of income your only option may be Chapter 13.
What is Chapter 13?
Chapter 13 bankruptcy is a reorganization bankruptcy. It has this name because, rather than liquidating assets to pay off a debt, the debtor consents to a repayment plan. Many advantages come with Chapter 13, including being able to retain your assets. Additionally, creditors often consider Chapter 13 more favorably than Chapter 7, as it indicates the debtor paid off more of the debt.
A Chapter 13 filing can also stop a bank from foreclosing on your home. This can assist homeowners in getting back up to date on their mortgage payments.
What are potential negatives of Chapter 13?
It can be difficult to stick to a budget while going through a Chapter 13 bankruptcy. Generally, if you file for a Chapter 13 bankruptcy the court will assume that every penny of disposable income you have will go toward paying the debt. Particularly if you have variable income, keeping to a payment schedule may be difficult.
However, Chapter 13 bankruptcy does not stay on your record as long as a Chapter 7 bankruptcy, and keeping assets is a major plus.