What Chapter 13 Bankruptcy Can Do for You

As you may already know, an individual -- or a jointly filing couple -- has access to two different types of bankruptcy. These bankruptcy types, called ‘chapters,’ are wildly different in execution. While the general goal of both types of bankruptcy is to get on top of crippling debt, Chapter 13 bankruptcy is the most sensible option for homeowners with steady income but too much debt. Whether your debt is from a business venture gone wrong, a long period of unemployment, or anything else, filing a Chapter 13 can help you throw off your debt for a new start.

The Basics of Chapter 13 Bankruptcy

When most people think of bankruptcy, their thoughts immediately jump to Chapter 7; in fact, many do not know there is another type! Chapter 7 is a very intense process which includes liquidation of assets, but Chapter 13 is much more gentle. Essentially, filing a Chapter 7 will allow you to consolidate your debt and make one payment per month to a trustee, who will then divide that payment among your secured creditors. This monthly payment will be calculated based on your disposable income, which means that you will never be forced to choose between paying your creditors and paying for the necessities.

The Benefits of Chapter 13 Bankruptcy

If you are in enough debt to file for bankruptcy, Chapter 7 might seem like an ideal option, but there are many reasons to choose to file a 13 instead. Chapter 7 requires liquidation of assets, so if your home is an asset -- if it has a significant amount of equity -- and you’d rather not lose it, a Chapter 13 will negate that risk. If you have a steady job or other source of income, paying once per month instead of getting rid of your debt completely will keep your assets safe. Additionally, Chapter 13 bankruptcy will stay on your credit report for seven years, while a 7 will stay for ten years.

The Bottom Line of Chapter 13 Bankruptcy

There are pros and cons for both types of bankruptcy, and what those pros and cons are has a lot to do with your personal situation. They have plenty of similarities; for example, both types come with an automatic stay as soon as you file. The difference lies in the way the bankruptcy will affect your life and whatever family you have. If you have enough disposable income to pay a little each month but not enough to pay each individual creditor the amount they demand, Chapter 13 is most likely your best option.

If you have questions about whether or not Chapter 13 Bankruptcy is for you, you may wish to set up a no-cost consultation by calling BDJ Express Law at 801-394-2336 for our Ogden offices, or 801-285-9021 for our Draper offices. We look forward to hearing from you.

"I was worried I would lose everything. Brian helped me sort things out and restored my life. I don't know where I'd be without him!"

-Sue H. Ogden, UT