Making the decision regarding which chapter of bankruptcy to file is a difficult one. The decision to file Chapter 13 bankruptcy over Chapter 7 depends on what type of debt you are seeking to eliminate, where you live, and what you own. While bankruptcy doesn’t eliminate all types of debt such as child support, alimony, most tax debts, and student loans, it can help with unsecured debt from credit cards and medical debt. In a few situations, there are things that only a chapter 13 bankruptcy can do, and so we’ll discuss the advantages of Chapter 13 bankruptcy over Chapter 7.
If you are saddled with serious debt problems filing bankruptcy can be an invaluable tool to remedy your debt problems. By filing for Chapter 13 bankruptcy protection instead of Chapter 7 bankruptcy you will be able to stop a mortgage foreclosure, allow you to keep nonexempt property, and utilize what is known as a “cram down” which is useful with secured debts that are worth more than the property that secures them.
Chapter 13 bankruptcy is perhaps the best tool in stopping the foreclosure sale of your property and will make your lender accept a plan that allows you to catch up on missed payments over the life of your repayment plan while continuing to make your normal mortgage payment. Additionally Chapter 13 bankruptcy allows you to use your income to fund your repayment plan and keep all your exempt property. In certain situations, you can also use Chapter 13 protection to reduce debt by making the amount owed equal to the replacement value of your property and then paying that new amount in your Chapter 13 repayment plan (“Cram down”). There are certain rules to Chapter 13 “cram downs” that your bankruptcy lawyer can explain to you in greater detail.
While Chapter 7 bankruptcy can be useful in wiping out credit card debt and other unsecured debts, in addition to stopping collection activities and eliminating certain liens, if you have a steady income and have property you wish to keep, Chapter 13 bankruptcy may be a better choice for your personal and financial position. It’s highly advisable that you discuss your choices with a qualified bankruptcy attorney in Sacramento who will know the best type of bankruptcy for you and help you navigate the bankruptcy process from start to finish.