Many people assume that the best type of bankruptcy for their debt situation is debt elimination through Chapter 7. While Chapter 7 does have its benefits, it isn’t for everyone. There is much to be gained in a Chapter 13 case, some of which could actually put you ahead of the game in the future.
Why Chapter 13?
The thing that scares people away from Chapter 13 is the idea of debt repayment. When you are dealing with overwhelming debts you may assume that having them eliminated rather than repaid is the best option. Actually, repaying debts is not only your responsibility, but it can put you leaps ahead in the credit game after your case is discharged. Future creditors look for debt repayment over elimination histories, and are often more willing to lend to post-bankruptcy consumers that have exited Chapter 13 instead of Chapter 7.
Chapter 13 is also a better option for anyone who is carrying secured debts like a mortgage or car loan. Although bankruptcy exemption laws may provide minimal protection of such assets in a Chapter 7 case, the debts will have to be repaid if you intend to keep possession of these assets. Chapter 13 allows for debt repayment spread out over a longer period of time, making the repayment more affordable. You may also be able to freeze interest or delinquency fees in the process. Further, some debts that may not be eligible for Chapter 7 bankruptcy, like income tax or student loan debts, may be able to find help under a Chapter 13 case.