As an individual with mounting debt and an interest in bankruptcy, it’s natural for your attention to first turn to Chapter 7. And while it’s the right choice for many consumers, not everyone qualifies. Fortunately, Chapter 13 bankruptcy is another option to consider.
With a Chapter 13 bankruptcy filing, you’re able to use your regular income to repay some or all of your debts via a repayment plan that lasts three to five years.
In contrast to Chapter 7, Chapter 13 bankruptcy is a longer process, as you’re required to partake in a repayment plan. But even though you don’t get the immediate fresh start you’re looking for, there are still benefits of this type of bankruptcy.
- Reschedule secured debts: Outside of your mortgage, you can reschedule secured debts, such as a car loan, over the life of your repayment plan. Not only does this allow you to keep your property, but you may also end up with a lower monthly payment.
- Less impact on your credit report: A Chapter 7 bankruptcy filing will remain on your credit report for 10 years, while a Chapter 13 bankruptcy filing will only stay in place for seven years. Both types of bankruptcy will impact your finances and ability to secure a loan, but it never hurts to have it removed from your credit report three years sooner.
- Save your home from foreclosure: As soon as you file for Chapter 13 bankruptcy, the automatic stay will bring an end to foreclosure proceedings for the meantime. From there, you can consider if you’re able to make up past due payments through your repayment plan. This may allow you to keep your home.
- Opportunity to repay some or all of your debts: This isn’t important to everyone, but if you want to attempt to make good on your promises, Chapter 13 bankruptcy allows you to do just that. Even if you don’t pay all of your debt, it’s better that none at all.
Don’t sell yourself short by overlooking the benefits of Chapter 13 bankruptcy. Learn more about the process, the benefits and whether or not it would work for someone in your position. This will help you decide if now’s the time to move in this direction.