Pros and Cons of Chapter 13 Bankruptcy
When you are having difficulty making payments on your debts and are considering personal bankruptcy, you may be debating between Chapter 7 bankruptcy and Chapter 13 bankruptcy—the two most common types of consumer bankruptcy. These forms of personal bankruptcy are quite different from one another, and it is important to understand the distinctions. While both types of bankruptcy will ultimately result in a discharge of eligible debts, the timeline for each is quite different, and each type of bankruptcy has its own pros and cons. We want to tell you more about the benefits and limitations of Chapter 13 bankruptcy. If you need assistance filing, you should contact an Oak Park bankruptcy attorney as soon as possible.
Pros of Chapter 13 Bankruptcy
There are a number of benefits of Chapter 13 bankruptcy. For many people who file for Chapter 13 bankruptcy, one of the primary benefits is that it can allow you to avoid foreclosure on your home and to remain in your property. Chapter 7 bankruptcy cannot do this. How does this work? In a Chapter 13 bankruptcy case, as soon as you file, the automatic stay will prevent debt collectors and creditors from taking any additional action against you for debts owed—including any steps in the foreclosure process. The automatic stay also applies in Chapter 7 cases, but because of the way Chapter 13 works as a reorganization bankruptcy, the debtor can “reorganize” debts through a repayment plan and get back on track. Accordingly, a debtor in Chapter 13 bankruptcy can catch up on mortgage payments and avoid foreclosure.
Another major benefit of Chapter 13 bankruptcy is that you can obtain bankruptcy protection without having your non-exempt assets liquidated. In a Chapter 7 bankruptcy case, all non-exempt assets are liquidated (or sold) to repay your creditors. This process does not occur in a Chapter 13 bankruptcy case.
Cons of Chapter 13 Bankruptcy
While Chapter 13 bankruptcy is often preferable because it can allow you to avoid foreclosure does not result in non-exempt assets being liquidated, it also has some potential drawbacks. First, it takes quite a long time. Most Chapter 13 bankruptcy cases take anywhere from three to five years before the repayment plan is completed and the debtor receives a discharge.
Since Chapter 13 bankruptcy cases take much longer than Chapter 7 bankruptcy cases and are reorganization bankruptcies, debtors do not get a “fresh start” almost right away as they do with Chapter 7 bankruptcy cases.
Another limitation of Chapter 13 bankruptcy is that you need to prove your eligibility based on your total debt. If you owe too much secured or unsecured debt, you will not be eligible for this type of bankruptcy.
Seek Advice From a Bankruptcy Lawyer in Oak Park
Determining which type of bankruptcy is best for you can be a complicated process that you should work through with an experienced bankruptcy attorney in Oak Park. Our consumer protection advocates routinely assist clients with both Chapter 7 and Chapter 13 bankruptcy cases, and we can speak with you today about your eligibility for each type of bankruptcy. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Can I Pass the Means Test to File for Chapter 7 Bankruptcy?
Benefits of Filing for Bankruptcy
Pros of Chapter 13 Bankruptcy
There are a number of benefits of Chapter 13 bankruptcy. For many people who file for Chapter 13 bankruptcy, one of the primary benefits is that it can allow you to avoid foreclosure on your home and to remain in your property. Chapter 7 bankruptcy cannot do this. How does this work? In a Chapter 13 bankruptcy case, as soon as you file, the automatic stay will prevent debt collectors and creditors from taking any additional action against you for debts owed—including any steps in the foreclosure process. The automatic stay also applies in Chapter 7 cases, but because of the way Chapter 13 works as a reorganization bankruptcy, the debtor can “reorganize” debts through a repayment plan and get back on track. Accordingly, a debtor in Chapter 13 bankruptcy can catch up on mortgage payments and avoid foreclosure.
Another major benefit of Chapter 13 bankruptcy is that you can obtain bankruptcy protection without having your non-exempt assets liquidated. In a Chapter 7 bankruptcy case, all non-exempt assets are liquidated (or sold) to repay your creditors. This process does not occur in a Chapter 13 bankruptcy case.
Cons of Chapter 13 Bankruptcy
While Chapter 13 bankruptcy is often preferable because it can allow you to avoid foreclosure does not result in non-exempt assets being liquidated, it also has some potential drawbacks. First, it takes quite a long time. Most Chapter 13 bankruptcy cases take anywhere from three to five years before the repayment plan is completed and the debtor receives a discharge.
Since Chapter 13 bankruptcy cases take much longer than Chapter 7 bankruptcy cases and are reorganization bankruptcies, debtors do not get a “fresh start” almost right away as they do with Chapter 7 bankruptcy cases.
Another limitation of Chapter 13 bankruptcy is that you need to prove your eligibility based on your total debt. If you owe too much secured or unsecured debt, you will not be eligible for this type of bankruptcy.
Seek Advice From a Bankruptcy Lawyer in Oak Park
Determining which type of bankruptcy is best for you can be a complicated process that you should work through with an experienced bankruptcy attorney in Oak Park. Our consumer protection advocates routinely assist clients with both Chapter 7 and Chapter 13 bankruptcy cases, and we can speak with you today about your eligibility for each type of bankruptcy. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Can I Pass the Means Test to File for Chapter 7 Bankruptcy?
Benefits of Filing for Bankruptcy
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