Although most debtors assume they want complete debt elimination from a Chapter 7 case, there is much to be gained by filing for Chapter 13 instead. The problem most people see with Chapter 13 is the repayment requirement, often an issue that can of value rather than hardship. Getting to understand the Chapter 13 process is one way to combat misconceptions and take advantage of the benefits the process can offer.
Choosing Chapter 13
Most people who consider filing for bankruptcy assume that they cannot repay their debts at all. The truth is, many people can afford to repay some of their debts with the help of Chapter 13. In a Chapter 13 case, debts are prioritized and consolidated for repayment. Although not all creditors will receive payment in a Chapter 13 bankruptcy, the debtor has the benefit of protecting assets while they make a single payment each month. Chapter 13 bankruptcy is also best for dealing with secured debts like a mortgage or car loan, especially if the debtor wishes to keep the property.
Another big advantage of the Chapter 13 process is the potential for credit protection. Although bankruptcy does not directly damage one’s credit, it can make securing future credit more challenging. Creditors are often more willing to extend a line of credit to a person who exits Chapter 13 than someone whose debts were discharged in a Chapter 7 case. Why? The simple fact that debts were repaid rather than eliminated, which is often viewed as a sign of more responsible borrowing.