Debtors who are looking to file for bankruptcy are usually debating between chapter 13 and chapter 7 bankruptcy. While each has their pros and cons, and will benefit different people based on their unique situation, many people find chapter 13 bankruptcy to be preferable as this allows them to develop a repayment plan in which they would repay their debts over a 3-5 year period, instead of immediately having to liquidate their assets to pay for their debts. Here are just a few of the benefits of choosing chapter 13 bankruptcy.
Avoid Foreclosure
Perhaps the greatest benefit of chapter 13 bankruptcy is that it can allow individuals to save their home from foreclosure. By filing chapter 13, individuals can stop foreclosure proceedings and are given the opportunity to make up for missed payments on mortgages and car loans over time. However, to avoid foreclosure you will have to be able to continue to make mortgage payments on time during the chapter 13 plan period. Chapter 7, on the other hand, is not as forgiving and likely will lead to foreclosure, which is why many people looking to keep their homes prefer chapter 13.
Credit Scores
When considering the long-term consequences of chapter 13 vs chapter 7 bankruptcy, chapter 13 is often considered to be more favorable as it does not stay on your credit history for as long. While creditors will see that you filed for chapter 13 bankruptcy for 7 years, chapter 7 will show on your records for 10 years. While three years may not seem like that big of a difference, those extra three years can mean three years where it is harder for you to get a vehicle, rent a house, or get a credit card.
For many people, the more forgiving nature of chapter 13 bankruptcy makes it a more favorable option. If you are considering filing chapter 13 bankruptcy, check out this overview of the basics of chapter 13 bankruptcy, and contact us to find out about how we can help you during this difficult time.
