Individuals with too much debt and not enough income to cover those debts may go to great lengths to try to regain control over their budgets. However, circumstances like job loss, health issues, divorce and even motor vehicle collisions are outside of someone’s control and could easily lead to significant financial hardship.
Many people idealize the concept of a Chapter 7 bankruptcy because it is the fastest road to discharge for most people. However, just because it is the fastest option does not necessarily mean it is the best choice for you. Why is Chapter 13 bankruptcy a better solution for certain individuals?
They have valuable personal property
People also refer to a Chapter 7 bankruptcy as a liquidation bankruptcy. Before the courts will discharge your remaining unsecured debts, they will first require that you report all of your property to the trustee and agree to liquidate or sell off certain assets that you cannot exempt. Only after selling some of your property will you finally qualify for your discharge.
The more property you have in your name, the more likely you would be to lose assets possibly worth even more than the debt you intend to discharge. When you already have valuable property, Chapter 13 bankruptcy can be the better choice. Although you do have to set up a repayment plan that will require monthly payments for between three and five years, you don’t have to sell off your property to pay your debts.
When you’re income is too high to qualify for Chapter 7
Anyone who hopes to file for a Chapter 7 bankruptcy will first have to perform a means test. The means test involves making certain adjustments to your income and then comparing it to the median income for your household size in the state.
If you make too much money to qualify for a Chapter 7 bankruptcy, Chapter 13 bankruptcy can grant you an automatic stay and help you get rid of some of your unsecured debts. Although there are both income and debt limits for a Chapter 13 filing, many successful professionals and business owners can qualify.
Learning more about the benefits of Chapter 13 bankruptcy can help you choose the best solution for your financial woes.