It may be simpler to qualify.
In 2005, Congress inserted a """"means test"""" to the Bankruptcy Code, among other modifications. In order to qualify for a Chapter 7 bankruptcy at this time, you cannot have a high enough income or sufficient ""disposable"" income at the end of the month, according to a calculated formula, to pay off at least a portion of your debts. In reality, not all individuals who file for bankruptcy are unemployed or destitute. Chapter 13 bankruptcy is frequently the best option for those who are ineligible to file for Chapter 7, which is frequently faster and simpler, or who need to take advantage of Chapter 13's plan repayment options for delinquent secured debt. Upon filing your Chapter 13 bankruptcy petition and repayment plan, a trustee will examine your financial situation and determine if your proposed repayment plan satisfies the requirements for confirmation. Once confirmed, your creditors are obligated to accept the payments outlined in the plan, even if they are ultimately paid a substantial quantity less than the original debt before bankruptcy. Prior to filing, it is prudent to consult a knowledgeable professional who can evaluate your financial circumstance and advise you on whether you qualify for Chapter 13 and whether filing is in your best financial interest.
It safeguards nonexempt property.
If you file for bankruptcy, you are required to identify all of your assets and liabilities. Some of your assets may be deemed ""nonexempt"" under Chapter 7 if they fall outside of the federal or state exemptions for property you can keep. The Chapter 7 Trustee may sell your nonexempt assets to repay creditors and satisfy your debts. You may have cash in excess of the Chapter 7 exemptions, excess equity in real estate, or valuable personal property. In a Chapter 7 bankruptcy, this property could be seized. In Chapter 13, the Trustee is not looking for nonexempt property to sell, but rather ensuring that you propose a feasible repayment plan that takes care of your creditors to the best of your ability in accordance with Bankruptcy Code guidelines. As long as your Chapter 13 plan is confirmed by the court and you make the required monthly plan payments, you can keep the property you want to keep, repay past-due secured debt (mortgage payments, car payments) and """"priority"""" unsecured debt (certain state and federal taxes) over time, and even prevent the foreclosure of your home.
You might believe it's the """"Right Thing To Do""""
Let's be honest: with a Chapter 13 you will typically pay off more of your debt (using future income) compared to a Chapter 7, in which the Bankruptcy Court forces your unsecured creditors to completely write off your debt. While both Chapter 7 and Chapter 13 will likely result in the eventual discharge of your unsecured debts, choosing Chapter 13 will demonstrate your willingness to assume responsibility for your debts to the best of your financial ability while using the available resources to restructure your affairs in an ethical manner.
Because declaring bankruptcy can be a very painful and emotional process, it is best to conduct as much research as possible prior to making the decision, and it is always advisable to speak with a knowledgeable professional who can evaluate your personal financial situation and properly advise you on whether or not bankruptcy is the best course of action for you.
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