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Bankruptcy is chapter 13 bankruptcy for you?

bankruptcy chapter

For some debtors chapter 13 bankruptcy is a better option that chapter 7 bankruptcy and in some cases chapter 13 bankruptcy is the only option, as these debtors do not qualify for chapter 7 bankruptcy.

Many debtors assume that chapter 7 bankruptcy is better than chapter 13 bankruptcy, however, that is not always the case. This blog will address situations that prove to make chapter 13 bankruptcy favorable to the debtor and a better option than chapter 7 bankruptcy.

Some while being eligible for chapter 7 bankruptcy, may find it to be to their advantage to file for chapter 13 bankruptcy. This is as a result of their situation or circumstances they find themselves in. Some such situations are as follows:

The debtor is behind his/her mortgage or car loan – in this situation the debtor only wants to make up for the missed or outstanding payments in respect of car loans or mortgage payments and reinstate the original agreement.

Therefore, this situation favors chapter 13 bankruptcy as this form of bankruptcy allows for the debtor to make up missed payments and continue making payment, which is not an available option with chapter 7 bankruptcy.

The debtor has a tax obligation, student loan, back child support or some other debt which is not dischargeable under chapter 7 bankruptcy. Such debts while also non-dischargeable under chapter 13 bankruptcy, can be included with other debts in the chapter 13 bankruptcy payment plan and be paid over a period of time based on the payment plan.

The debtor wants to keep his/her non-exempt property – when filing for chapter 7 bankruptcy a debtor only gets to keep exempt property which is protected from creditors under the state of Texas laws and your non-exempt property is given to the bankruptcy trustee who sells it and distributes the proceeds of the sale to the debtor’s creditors.

However, when filing for chapter 13 bankruptcy you do not have to give up non-exempt property; in fact your debts are paid out of your income and you get to keep both exempt and non-exempt property.

Co-debtor debt on personal debt – if you file chapter 7 bankruptcy, your co-signer or co-debtor will have creditors knocking at his/her door in order to get payment, however, if you file chapter 13 bankruptcy this gets immunity for your co-debtor from creditors. This immunity comes with the condition that you must keep up with your bankruptcy payment plan.

The debtor wants to pay his/her creditors – this is where the debtor has the intention of paying his/her creditors but need the protection provided by the bankruptcy court as there are creditors who may be knocking on his/her door. In this case the debtor must file chapter 13 bankruptcy as this provides structure and deadlines for the debtor to pay his/her creditors and thus allowing the debtor to follow through on his/her intention to pay the creditors.

For more information on chapter 7 bankruptcy and chapter 13 bankruptcy in Texas contact a law firm of renowned professionals who have expertise in Texas bankruptcy laws.


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Michael Busby is a Houston divorce lawyer who has been in practice for over 20 years and appears daily in the Family Law Courts of Harris County and Fort Bend County Texas

Busby & Associates , have two Houston Offices, one in Chinatown, Houston Texas and another in Independent Heights, Houston, Texas. Michael Busby is Board Certified in Family law by the Texas Board of Legal Specialization.