When Chapter 13 is a Better Option than Chapter 7

Chapter 13 may not be your first choice for a bankruptcy, and many people wrongly assume that the monthly chapter 13 plan payments is wasted money. While it’s true that unsecured creditors such as credit cards usually receive some distribution in a chapter 13 plan, in most chapter 13s only a small portion of dischargeable debts is actually paid back. There are often circumstances where chapter 13 provides other forms of bankruptcy relief in addition to a discharge of debt. In fact, chapter 13 offers many options that chapter 7 does not, including the ability to get a defaulted mortgage or auto loan out of default and back on track, or cram down an auto loan that is underwater (i.e., stripping the second mortgage), repay taxes and other priority debts, stop interest from accruing on credit cards, protect a co-debtor/cosigner from collection on a joint debt, and more.

Factors when Chapter 13 may be better for you than chapter 7:

As an ARAG legal insurance member attorney, Lynn Wartchow assists clients with ARAG legal insurance in filing chapter 13 bankruptcy cases in Minnesota. If you are considering filing bankruptcy and want to know what a chapter 13 plan would look like for you, Lynn offers free consultations and evaluations including how much you can expect to pay into a chapter 13 plan and what debts are resolved for that amount.

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