People struggling financially might consider bankruptcy. Many people end up pursuing a Chapter 13 bankruptcy due to their unique circumstances. There are many benefits associated with Chapter 13 proceedings, also known as a wage earner’s plan.
What factors make a Chapter 13 bankruptcy potentially beneficial for filers?
1. No asset liquidation risk
Frequently, those pursuing personal bankruptcy worry about preserving their resources. They may have more home equity or personal property than they can exempt from liquidation. Chapter 13 bankruptcy cases do not require the sale of assets and are, therefore, beneficial for those with extensive personal holdings.
2. Loan modification opportunities
A Chapter 13 filer negotiates a repayment plan with creditors and the trustee appointed by the courts. That process often involves modifying mortgages and other large financial instruments, such as vehicle loans. Lenders may be more open to beneficial loan modifications in a Chapter 13 bankruptcy scenario than they might otherwise be.
3. Preserving good standing with creditors
If a filer pursues a Chapter 7 bankruptcy, their creditors do not receive any sort of repayment unless there are assets to liquidate. As such, those companies may choose not to do business with the filer in the future.
In a Chapter 13 bankruptcy, the repayment plan reduces the economic impact on creditors. They may then be more willing to extend new credit opportunities to the filer in the future. A Chapter 13 bankruptcy is more accessible to people, as there are no income limits. People may also feel less guilty or anxious about bankruptcy when it involves a structured payment plan.
Ultimately, Chapter 13 proceedings are potentially helpful for business owners, successful professionals and others experiencing temporary financial hardship. Discussing financial obligations and concerns with a skilled legal team can help people choose the right type of bankruptcy.
