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Bankruptcy Filing: When to Choose Chapter 13 Over Chapter 7

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A calculator on top of a cheque book and pen While many debtors file for Chapter 7 bankruptcy, there are some cases when Chapter 13 becomes a better alternative. The same is also true if you are not eligible to file for Chapter 7. It is normal to assume that Chapter 7 is always better as this can eliminate most of your debts, while the other chapter requires you to repay some portion. Note, however, that is not always the case.

Even if you qualify for Chapter 7, choosing Chapter 13 can benefit you in certain situations:

You Want to Pay to Keep Your House or Car Loan.

If you’ve fallen behind on loan payments but still want to pay them off, Chapter 13 is a good choice. Utah Bankruptcy Pros and Chapter 13 bankruptcy lawyers in Sandy note that making up car loan and mortgage arrears is only possible in this chapter.

You Have Debts That Cannot Be Eliminated in Chapter 7.

These include all types of student loans and certain tax obligations. You can include these debts in the Chapter 13 repayment plan and continue to pay them off.

You Want to Keep the Non-Exempt Property.

In Chapter 7, you can only keep exempt properties or those protected under the law. You will have to surrender nonexempt properties to the trustee, who will sell it to pay your creditors. In Chapter 13, however, you can keep them by repaying your debts using your income.

You Want to Protect a Co-Debtor.

When you file for Chapter 7, creditors will still hunt your co-debtor for payments. If you, however, choose Chapter 13, your co-debtor will be safe, but be sure to keep up with your repayment plan.

You Really Want to Pay Your Debts.

If you’re sincere with this intention, you can get the protection of bankruptcy to stop the creditors from harassing you. Chapter 13 is a good option, as it provides a formal structure with deadlines in helping you keep up with your intentions.

To learn more about bankruptcy chapters, it is best to talk to a professional. A reliable bankruptcy attorney will help determine which Chapter will work best for you.