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Chapter 13 bankruptcy's key benefits

Chapter 7 bankruptcy discharges your debt, while Chapter 13 bankruptcy creates a repayment plan. So, if you're weighing your two options -- assuming you're eligible, as some people are only eligible for one and not the other -- why would you choose Chapter 13?

First and foremost, it's set up to make debt affordable. For instance, maybe you have too much to pay all at once, when it's due, but you do earn a good wage and you could pay it back in installments. The repayment plan gives you the chance to do just that.

Another benefit is that you might be able to put an end to foreclosure and keep your home. Maybe the reason you were missing mortgage payments was because so many other debts were due at once. With them spread out, you can now afford your mortgage again.

Filing for bankruptcy also puts an automatic stay on the foreclosure. This can buy you some time, regardless of the eventual outcome.

Finally, Chapter 13 is better for your credit score. You're still paying off the debt eventually, which looks better than failing to pay anything other than the money generated by your liquidated assets. A Chapter 7 filing also stays on your credit report for a decade, which is three years longer than the Chapter 13 filing will remain. You can repair your credit sooner, get new loans, and begin working positively toward the future.

Again, not everyone qualifies for Chapter 13 bankruptcy, but these advantages show you why it is absolutely important to look into all of the options you have to eliminate debt.

Source: FIndLaw, "Benefits of Chapter 13," accessed March 24, 2017

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