Ways Chapter 13 Bankruptcy May Help You That Chapter 7 Cannot

7 February 2019
 Categories: , Blog


Even though Chapter 13 bankruptcy requires people to repay their debts through a repayment plan, it is often the more beneficial chapter of bankruptcy to choose. Chapter 13 offers perks that Chapter 7 does not offer, and here are some of the ways Chapter 13 bankruptcy could help you and your financial situation.

Stop a Foreclosure

The first thing that Chapter 13 can do that Chapter 7 cannot do is stop a foreclosure. A foreclosure that goes through will result in you losing your home, and there are very few methods around that will stop a foreclosure from taking place. Chapter 13 offers a way to stop a foreclosure, though, and it gives you years to repay the past-due amount you owe your lender. If you choose to file Chapter 13, you will be able to save your home if you make your payments as scheduled with the Chapter 13 plan.

Strip Junior Liens off Your House

The second thing Chapter 13 can do for you is strip junior liens off your house. A junior lien is a second or third mortgage on a house. If you owe more on your house than the value it currently is worth, you could possibly use this process to eliminate a second and third mortgage that you have on the property, and this would leave you in a much better financial condition.

Help You Catch Up on Debts that Do Not Qualify for a Discharge

Finally, there are certain types of debts you may have that would not qualify for a discharge under Chapter 7. When it comes to these types of debts, you would be responsible to repay them in full if you used Chapter 7. Unfortunately, that can make Chapter 7 a less beneficial branch of bankruptcy for many people to use. The benefit of using Chapter 13 for debts like this is that it will give you up to five years to repay the debts, and during this time the creditors cannot come after you for more money. They must take the amount agreed upon in your Chapter 13 plan. Debts that fall into this category include alimony, child support, student loans, and back IRS taxes.

If you think that Chapter 13 bankruptcy might be beneficial for your situation, you should contact a bankruptcy lawyer to find out. A lawyer will help you determine if this would be a good decision or not, and a lawyer can also help you learn about alternatives to bankruptcy.