Even though the large majority of personal bankruptcy cases are under Chapter 7 bankruptcy, Chapter 13 bankruptcy is still often a good option for people who are struggling with their finances but do not qualify for Chapter 7. If you’re trying to figure out whether Chapter 7 or Chapter 13 would be more likely for your own situation, here’s a quick guide about what Chapter 13 bankruptcy entails:
- Under Chapter 13, and unlike Chapter 7, you are required to pay back at least some of your debts. This does not include debts such as student loan repayments and child support payments, which are required to be paid in full under both types. Under Chapter 13, the court works with you to create a reasonable repayment plan instead of liquidating your remaining debts.
- Although this requires an extensive repayment plan and it requires a lot of organization, it does mean that you have a greater chance of keeping certain assets you own, such as your car. These items might otherwise be used to pay back debts under Chapter 7.
- Nevertheless, it’s important to understand that filing bankruptcy under Chapter 13 is still… well, filing bankruptcy. This means that there are still consequences, and these consequences will stick around for a while. You’ll have your bankruptcy on your credit report for years after you file for bankruptcy, and you’ll also find it harder to take out any other lines of credit for a few years after filing.
Filing for bankruptcy definitely isn’t a perfect solution for everyone, and it’s far from an easy way out. It’s important to understand exactly what you’re facing in order to decide if filing for personal bankruptcy under Chapter 13, or even under Chapter 7, is right for you.