Why would anyone want to undergo two bankruptcies in quick succession? It boils down to the limitations of each bankruptcy type. Each type of bankruptcy is designed to assist the filer achieve a particular result. Occasionally, multiple outcomes must be attained, and a single bankruptcy filing is insufficient.
A Chapter 7 bankruptcy is intended to assist the debtor discharge a portion of his debts and provide him with a fresh financial start. For instance, if you owe $20,000 in credit card debt and have recently lost your job with no employment prospects in sight, you are in a dire financial situation.
In addition, as your credit card nonpayment penalty fees and late fees continue to accrue, it becomes evident that you will not be able to realistically repay the debt. In this situation, you can file Chapter 7 bankruptcy to have the $20,000 debt against you discharged. In addition, your debt has been reduced by twenty thousand dollars.
However, unfortunately for you, not all debts are dischargeable. In numerous instances, mortgages cannot be discharged. In addition to income tax debts, child support, spousal support, and other debts are typically not discharged in Chapter 7 bankruptcy. So, while you will undoubtedly end up owing less once your Chapter 7 bankruptcy has run its course, you will still be accountable for your other non-dischargeable debts.
The purpose of filing Chapter 13 bankruptcy immediately is to enable you to repay these non-dischargeable debts in a structured manner. Assume, for instance, that upon completion of your Chapter 7 bankruptcy you will still owe $30,000 on your mortgage with a $480 monthly mortgage payment. Chapter 13 bankruptcy will not eliminate this debt. However, it may enable you to restructure your repayment to the bank. Therefore, you may wind up paying $400 per month instead of $480. And at the conclusion of the Chapter 13 period, which typically lasts between three and five years, you will have paid off all of your creditors.""
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