Most who file for bankruptcy want to file a Chapter 7. By filing Chapter 7, everything is said and done within three to six months and the slate is wiped clean. So when potential filers learn that they are only eligible to file a Chapter 13 or their attorney recommends a Chapter 13 over a Chapter 7, they panic. Three to five years in bankruptcy with monthly payments throughout the duration of that time? Why would someone file a Chapter 13 and drag the process out when Chapter 7 gets you out of debt faster with no payment plan?
The most obvious reason your attorney would advise filing for a Chapter 13 bankruptcy is that you are not eligible for a discharge of debt in Chapter 7. This could be for a variety of reasons from the time between previous bankruptcy filings to having a household income that is over the Minnesota median household income. These types of situations could make a debtor ineligible for Chapter 7.
Another common reason your attorney would advise you towards a Chapter 13 is that you have disposable income or non-exempt assets that you do not want to lose. Recreational vehicles, investment and savings accounts are typically non-exempt. If you have assets such as these and do not want to lose them, your attorney could suggest filing a Chapter 13 bankruptcy. A Chapter 13 payment plan can be designed to pay back arrears –mortgage or vehicle. Filing this type of bankruptcy can help save vehicles or a home where payments have fallen behind.
In some cases, Chapter 7 bankruptcy can negatively impact co-debtors or relatives. While the filer is protected and discharged from debts that have been co-signed, the remaining co-signer remains liable for the entirety of that debt. Additionally, many of us borrow and pay back loans from relatives over the years. Paying back these kinds of “preferential” debts within a certain time-frame before filing can prompt a Chapter 13 trustee to pursue legal action against relatives of the debtor to retrieve those payments.
While for many, a Chapter 13 bankruptcy may not be the first choice, it may be the best choice. Your Kain & Scott attorney can help guide you towards the most beneficial option for you. 1
Request a consultation with MN’s MOST EXPERIENCED bankruptcy law firm at www.kainscott.com.