Bankruptcy laws offer several different options for people and businesses that require financial relief. Individuals filing for bankruptcy typically choose between Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 13 bankruptcy takes longer to complete than Chapter 7 filings and requires a repayment plan, which Chapter 7 filings do not. There are many reasons why people choose Chapter 13 bankruptcy over Chapter 7 bankruptcy, and the three reasons below are among the most common.
1. Failing to qualify for Chapter 7 proceedings
Not everyone has the option of filing a Chapter 7 bankruptcy. People must pass a means test where they adjust their household income and compare it to the state median based on their household size. People with above-average income may need to pursue Chapter 13 bankruptcy.
2. An inability to exempt valuable assets
Chapter 7 bankruptcy may require the liquidation of certain assets. There are exemptions available that allow people to protect some of their resources. Individuals who have more property than they can exempt may determine that Chapter 13 bankruptcy is better because it allows them to preserve all of their assets.
3. Continued relationships with creditors
In some cases, the desire to continue working with certain creditors may inspire people to choose Chapter 13 bankruptcy. Good-faith attempts to address a debt during a repayment plan can go a long way toward preserving a positive working relationship after a bankruptcy.
Learning more about Chapter 13 bankruptcy can help people choose the best solution when they face financial hardship. Chapter 13 bankruptcy is available to people in a variety of challenging financial circumstances.
