Chapter 13 bankruptcy is not the liquidation bankruptcy that you probably think of when you imagine someone going through one. Instead, this form of bankruptcy is much like a consolidation and repayment plan for debt.
Chapter 13 bankruptcies are designed for people who still earn wages and a regular income but need support to get out of debt. An installment plan is set up, and wage garnishments, foreclosures and other types of collections are put on hold.
Chapter 13 offers a number of benefits that Chapter 7 bankruptcy doesn’t offer. For example, with Chapter 13 bankruptcy, you don’t have to give up anything that you own. Instead, you keep your assets, but you pay back a portion of what you owe over a period of three to five years. Chapter 13 bankruptcy also helps people prevent their homes from going into foreclosure, and it can help cure delinquent mortgage payments over time if the person continues to pay the required installments appropriately.
Is Chapter 13 bankruptcy a better choice than Chapter 7?
It’s not necessarily a better choice, but it is a different option if you don’t qualify for Chapter 7 bankruptcy or need the additional protections that a Chapter 13 bankruptcy provides you with. Chapter 13 bankruptcies are unlike Chapter 7 bankruptcies in that they can protect third parties, like co-signers, from debt collections, which is something you may be interested in.
If you’re ready to file for bankruptcy, it’s important to choose the correct type. Your attorney will discuss the options with you to help you choose which is right for you.