Chapter 13 bankruptcies do require the debtor make payments to the bankruptcy estate based on their disposable income. When a chapter 7 debtor has lots of non-exempts assets (usually toys: motorcycles, boats, ATVs, guns) and the debtor does not want to lose those assets to the bankruptcy estate, a chapter 13 bankruptcy could be a better option. Although, a chapter 13 debtor has to make payments to the bankruptcy estate, the debtor is allowed the duration of the chapter 13 plan to pay the estate for the value of the non-exempt assets. In a chapter 7 bankruptcy, the debtor has to provide the bankruptcy estate with the value of the non-exempt assets within a short period of time or risk losing the assets.
Even if a potential chapter 7 bankruptcy filer does not have non-exempt assets, there may be other reasons to avoid a chapter 7 filing. Preference payments and gifts are another reason a potential chapter 7 bankruptcy filer may want to file a chapter 13 bankruptcy. Large gifts or loan repayments to friends and family members are considered preferences or avoidable transfers by the bankruptcy court. This means the estate has the power to avoid (take back) those payments or gifts from the beneficiary. To prevent getting a family member sued, a chapter 13 filing could be a better option for the bankruptcy filer.
Just because you are eligible to file a chapter 7 bankruptcy does not mean that a chapter 7 filing is the best option for you. Contact the attorneys at LifeBack Law and see us at www.LifeBackLaw.com and let us help you get your life back.