Filing for bankruptcy can be a great way to resolve debt troubles and protect your assets from creditors. While it isn’t for everyone, there are very different benefits and risks associated with Chapter 13 bankruptcy versus Chapter 7. In general, it is always best to repay your debts to the best of your ability, which is why Chapter 13 carries some specific perks that a Chapter 7 bankruptcy cannot provide.
Besides the obvious relief from overwhelming debts, Chapter 13 allows for take advantage of a few important aspects. First, Chapter 13 allows you to repay your debts over several years. While this may not sound enticing at first, remember that your future creditors will look more favorably on debt repayment rather than debt elimination. Chapter 13 is designed in such a way to allow you to roll multiple debts into one monthly payment, that is generally very affordable within your budget.
Chapter 13 can also provide better asset protection and help alleviate secured debt problems more so than a Chapter 7. Mortgages and car loans are better protected when the debts become part of a repayment plan and are not liquidated to satisfy payment. Further, you may even be able to lower your overall principal debt balance on some secured debts. In some cases, a Chapter 13 can separate a portion of your mortgage or car loan debt into an unsecured debt to be eliminated, leaving you with the remaining portion for your Chapter 13 plan. This can be extremely helpful in the event you owe more than what the asset is worth on your mortgage or car loan.