Sometimes, you need a fresh start after struggling with debt. But you can't afford to lose so many of your assets and stay afloat. When bankruptcy is the best option, there are ways of getting the protection you need from creditors while keeping what you need to recover.
In a Chapter 7 bankruptcy, most debts are canceled but people can expect most of their available assets to be liquidated. This may be a good option for individuals with few remaining assets. A Chapter 13 bankruptcy is often better for businesses or individuals with many assets.
Chapter 13 bankruptcy creates a repayment plan for some or all of the debt that a person or entity is facing. This plan must be reasonably met with the ability of the declarer to make income. So anyone who declares Chapter 13 bankruptcy must have reliable income.
Credit reports may record the effects of a Chapter 13 bankruptcy for a shorter time than a Chapter 7 declaration. If someone does not qualify for Chapter 7 bankruptcy, Chapter 13 may be the option that gives them more time to deal with the problem by reducing monthly obligations.
There are some debts and obligations that Chapter 13 bankruptcy cannot cover. Child support payments, federal tax debt, criminal fines and student loans are usually not eligible for negotiation under this type of bankruptcy.
Anyone who is considering Chapter 13 bankruptcy should consult with an attorney. Legal representation can be very helpful when preparing a filing and dealing with issues that come up in bankruptcy court or negotiations with creditors.