Chapter 13 bankrutpcy gives you the opportunity to pay back debts
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When new clients come to us looking for debt relief, there is sometimes confusion about the types of bankruptcy and how each works and can benefit you. If you qualify, Chapter 7 discharges most unsecured debts right away but Chapter 13 differs because it offers you breathing room to pay off your debts. More North Carolina consumers opt for Chapter 13 to try and pay off their debts rather than simply discharging them.
For all of North Carolina last year, Chapter 13 outweighed Chapter 7 filings significantly. 58% of bankruptcy filers last year opted for Chapter 13 and the opportunity to repay their debts rather than simply ask for them to be discharged. This is an admirable way to address your financial obligations if you can afford to do so.
When Chapter 13 Just Isn't Feasible
Granted, for some of our clients, Chapter 13 isn't feasible because they are unemployed, underemployed or dealing with medical disabilities which make it impractical for them to cope with what they owe, even given some additional time. But many who opt for Chapter 13 also qualify for Chapter 7 so they are making a deliberate choice to pay off debts they could easily have discharged.
Make the smart choice between Chapter 7 or Chapter 13 bankruptcy
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When Chapter 13 Is Preferable
There are some circumstances when we advise clients to opt for Chapter 13 over Chapter 7. Here's when it can be more advantageous:
- If you're behind on your mortgage and want the chance to get caught up on payments and keep your home.
- If you're behind on your car loan and want the chance to try and make up payments to keep your vehicle.
- If you're behind on debts like student loans and income taxes that can't be discharged, you can get lower payments for a time.
- If you want to protect a co-signer on any debt, paying it off in Chapter 13 will prevent creditors from pursuing them.
- If you have property you want to protect such as more equity in a home than would be protected in a Chapter 7 filing.
When Chapter 13 Isn't Optional
Sometimes our clients would like to file for Chapter 7 but don't pass the means test and so aren't allowed to. If you have sizable income – even if you have a mound of debts – you will likely not qualify for Chapter 7. If your disposable income exceeds the North Carolina legal limit, you will have to file a Chapter 13 instead.
If you're neck deep in debt and looking for relief but aren't sure which chapter is better for your unique circumstances, we can help. Contact the law offices of John T Orcutt to find out more about your options for filing a North Carolina bankruptcy with a free consultation at one of our convenient locations.