When Is Chapter 13 Bankruptcy A Better Option Than Chapter 7?

When Is Chapter 13 Bankruptcy A Better Option Than Chapter 7?

The good thing about a Chapter 13 bankruptcy is that you don't have to deal with any of your creditors directly. Instead, the court-appointed trustee will handle the payments for you. You also won't have to deal with letters or phone calls from creditors while you're under bankruptcy protection (from the moment you file, even before your case is decided and closed).

Chapter 7 and Chapter 13 bankruptcies each have a separate purpose and a number issues a relevant in deciding which to file. An individual wanting to file bankruptcy should see a qualified attorney before proceeding with the filing.

You have to be committed to making payments on time every single month for the duration of the bankruptcy. 1 missed payment and your Chapter 13 bankruptcy plan can be rendered null and void. Then you're back to square one with excessive debt and lawyer fees. Don't get yourself in this situation.

In short, Chapter 13 is basically a repayment plan, while Chapter 7 is known as straight bankruptcy. It is up to you and your bankruptcy attorney to decide which chapter is more appropriate to your specific needs. Be aware that filing for the wrong chapter, however, can make you lose your house.

Now, the good thing about that is the mortgage company can keep calling you and forcing you to make those late payments right before you file, but once you file those late payments are stretched out over three to five years and you have time to actually pay those out. So if you did get in a bad situation, something where you lost your work for a couple of months, got sick, other circumstances unforeseeable might have happened, the bank might being trying to foreclose on you. Now, your option is just to file a bankruptcy chapter 13 and all of the sudden you have three to five years to pay back the amount that you owe, and of course you've to keep making your mortgage payments.

People who end up filing for bankruptcy rarely have a good credit score to begin with. After all, not being able to make the payments usually causes a drastic decline in your credit score. While bankruptcy will affect your credit negatively, there is at least a light at the end of the tunnel.

Few people set out to file for bankruptcy when they get into debt. The problem is that getting into too much debt can easily spiral out of control. That's why it's a good idea to build up a financial savings cushion to protect yourself from getting into debt when a job loss or unexpected expenses come your way.