Posted on: 22 May 2020Share
If you compare Chapter 7 bankruptcy to Chapter 13, you will probably agree that Chapter 7 seems easier and provides more advantages. If this is true, then why do people use Chapter 13 bankruptcy? People use Chapter 13 for many reasons, and the truth is that it can be a more effective branch of bankruptcy for many people. Here are some of the reasons people use Chapter 13.
They Have No Choice About the Branch They Use
Chapter 7 offers perks that you cannot get with Chapter 13, but Chapter 7 is not a branch that everyone can use. Bankruptcy law has strict guidelines related to who can use Chapter 7. If you do not meet these guidelines and need financial relief through bankruptcy, you would have to use Chapter 7.
One of the ways that lawyers determine which branches you qualify for is the means test. This test bases your qualification by comparing your income to the income in your state. If you earn too much, you cannot qualify. Therefore, you would have to use Chapter 13 if you do not qualify for Chapter 7 but need financial relief.
To Save a Home
Some people use Chapter 13 even if they qualify for Chapter 7 because of the differences in these branches. A person who is on the verge of losing a home to foreclosure will not benefit by using Chapter 7. Chapter 7 will not stop or prevent foreclosure, and it will not allow you to work out a repayment plan with your mortgage lender. Chapter 13 does provide a way to save your home from foreclosure, though. If you want to save your home through bankruptcy, you must choose Chapter 13 instead of Chapter 7.
You Owe Money on Non-Qualifying Debts
The other perk of using Chapter 13 is how it allows you to catch up on past-due payments. If you are behind on any payments for non-qualifying debts, this branch lets you catch up through your repayment plan. A non-qualifying debt is one that is not dischargeable in a Chapter 7 case. It is a debt you must repay. If you owe money to the IRS or for student loan debt, you must repay it. Therefore, these debts are not dischargeable. Filing for Chapter 7 would not provide relief to you.
If you have questions about the differences in branches or need help filing, contact a local bankruptcy lawyer to learn more about your options.