There are multiple kinds of bankruptcy available for individuals, ranging from Chapter 12 bankruptcy for fishermen and farmers to Chapter 7 bankruptcy for those with low income and few assets.
If you have a good job or substantial personal wealth but still have a high level of debt, then Chapter 7 bankruptcy likely isn’t the best option for you. Chapter 13 bankruptcy is known as a wage earner’s bankruptcy for a reason. It is available to those with higher incomes and those with more significant assets. What are some of the benefits that come with Chapter 13 bankruptcy?
You still have the benefit of an automatic stay and a discharge
When you initially file for bankruptcy, creditors have to cease all collection activity. That could mean putting a halt to a pending lawsuit, stopping foreclosure and ending all of those intrusive collection calls to your home or place of work. If you successfully complete bankruptcy, the courts will discharge the remaining balance of specific, unsecured debts at the end of your proceedings.
You have an opportunity to renegotiate and partially repay major debts
Many people feel guilty when seeking bankruptcy protection, even if they know that they can’t balance their budget anymore. Chapter 13 bankruptcy involves a repayment plan that lasts for several years. That gives you an opportunity to at least partially repay your creditors instead of avoiding repayment altogether.
Additionally, for secured lines of credit like mortgages or car loans, Chapter 13 bankruptcy can give you an opportunity to negotiate more favorable terms that will make continued repayment easier on your current income. It’s also worth noting that unlike Chapter 7 bankruptcy where you may have to sell assets, Chapter 13 bankruptcy typically protects you from asset liquidation. An experienced attorney can help you determine whether Chapter 13 is right for you.