Deciding between which type of bankruptcy to file isn’t always an easy task. Further, once you decide you may find yourself ineligible for one type of bankruptcy. In general, there are a few reasons why some people choose to file for Chapter 13 over Chapter 7 bankruptcy.
If you have fallen behind on your mortgage payment, Chapter 13 bankruptcy may be more beneficial than Chapter 7. First, it can protect your home from foreclosure must faster and with greater confidence than a Chapter 7 case. In many states, there is no guarantee the home is protected from seizure during Chapter 7. Secondly, Chapter 13 allows you to repay your delinquent mortgage amounts (arrears) over a specified period of time. This allows you to get caught up on your mortgage payments in a way that you can afford, usually without any additional interest fees or costs.
Some assets are vulnerable for seizure and liquidation under Chapter 7 bankruptcy. Although there are bankruptcy exemptions that can offer protection of some of your property, each state’s exemption laws vary. This puts assets such as your house, car and personal property at risk during Chapter 7. Chapter 13 bankruptcy has far less risk of asset liquidation, mainly due to the fact that the debts are being repaid. As payments are made to the creditors through the Chapter 13 plan creditors are not allowed to seize and liquidate assets, which leaves you in possession of the property as long as you are making payments.