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Five Reasons to File Chapter 13 Bankruptcy

by | Feb 9, 2022 | Bankruptcy, Bankruptcy, Debt, Debt

By: Jamie L. Harris

Chapter 13 bankruptcy permits individuals with regular income to file a three to five-year repayment plan to address their debts. There are several advantages to filing Chapter 13 bankruptcy as opposed to Chapter 7 bankruptcy. Here are (5) five primary reasons individuals may choose to file Chapter 13 as opposed to Chapter 7:

  1. STOP A HOME FORECLOSURE. If you are facing a home foreclosure, filing for Chapter 13 bankruptcy will stay the foreclosure proceedings and you can repay the arrears over 3-5 years in your bankruptcy plan. Typically, in a Chapter 7 bankruptcy, a lender may not want to reaffirm with you if you are in significant arrears on mortgage payments.
  2. STOP A VEHICLE REPOSSESSION. Likewise, if you are several months behind on your vehicle payments, the arrears can be paid in your bankruptcy plan. You will need to remain current on existing payments going forward.
  3. YOU OWE PRIORITY TAXES. If you owe priority taxes like recent income taxes or withholding taxes, then those will not be discharged in a Chapter 7 bankruptcy proceeding. If you elect to file Chapter 13, the back taxes can be paid over the life of your Chapter 13 bankruptcy plan.
  4. YOU WILL LOSE NON-EXEMPT ASSETS IN CHAPTER 7. If you file for Chapter 7 bankruptcy, you have a limited amount of exemptions in personal property such as your home, vehicle, household goods, etc. If you have significant equity in your assets and do not want a Chapter 7 trustee to sell your non-exempt assets, then Chapter 13 may be ideal for you as you can pay the nonexempt equity into your Chapter 13 plan and retain those assets.
  5. YOU ARE NOT ELIGIBLE FOR CHAPTER 7 BANKRUPTCY. If you have a previous Chapter 7 bankruptcy in the last seven years and are not eligible for Chapter 7, then Chapter 13 may be an option for you. Also, if you are a consumer debtor who does not pass the “means test” for Chapter 7 eligibility, then a Chapter 13 bankruptcy is an alternative for you.

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset preservation and business restructuring law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy and complex litigation. For more information please call (859) 231-5800, email [email protected] or reach us on our contact page.

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