Many people in Bradley County and throughout the southeastern corner of Tennessee may wonder what advantages there are to filing a Chapter 13 as opposed to a Chapter 7 bankruptcy. After all, the more common Chapter 7 bankruptcy involves a quicker process that can give a family permanent debt relief in sometimes a matter of just weeks or a few months.
Although not an “advantage” strictly speaking, one reason people file Chapter 13 is because they have an income which is too high to qualify them for Chapter 7 bankruptcy. In other cases, a family may prefer to hang on to all of their property and go through with a repayment plan that the Chapter 13 requires, as filing a Chapter 7 could mean the loss of something important to them.
As this blog has mentioned previously another important advantage of the Chapter 13 is that it is more effective at delaying or even preventing foreclosure. Unlike the Chapter 7, a family can protect their home by incorporating overdue house payment in their repayment plan. In a Chapter 7, the bank is much more likely just to seek permission to foreclose on the house, which it is permitted to do even if a family has bankruptcy protection.
Moreover, a Chapter 13 does not stay on a person’s credit report for as long, that is, it remains on a report for 7 years instead of the 10 years required under a Chapter 7. This means 3 fewer years of having to explain to prospective lenders what caused the bankruptcy. Long term, a Chapter 13 can help a person get back on their feet financially more quickly than would a Chapter 7.
There are also the obvious benefits of having to make one payment to the bankruptcy trustee as opposed to dealing with and paying several creditors each month.
Of course, while this post serves as an overview, the facts and circumstances of a person’s case are what really determine whether to file a Chapter 13 over a Chapter 7. These specific facts and circumstances are best discussed with a qualified bankruptcy attorney.