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Is filing for Chapter 13 bankruptcy the best option?

Upon making the difficult decision to file for bankruptcy, one is faced with determining whether filing under Chapter 7 or Chapter 13 best suits their individual situation. It is best to make this choice following an examination of the benefits and disadvantages of each plan. Filing for Chapter 13 bankruptcy may be the best option for those who are seeking to avoid foreclosure, those who are prepared to make payments over a longer period of time and those who need to refile for bankruptcy more than once every six years.

One of the main benefits of filing for Chapter 13 bankruptcy is that debtors are able to keep the property on which they are making payments, which may not be the case for Chapter 7 bankruptcy. Chapter 7 bankruptcy involves an assessment by a bankruptcy trustee; any property that is not deemed exempt will be sold to pay off creditors. However, salaries earned and property purchased after filing for Chapter 7 may be kept by the debtor, whereas Chapter 13 bankruptcy plans require debts to be paid from disposable income - money remaining after necessities are paid - thereby restricting frivolous expenditures.

Deciding which plan to choose may also depend on the amount of time a debtor plans to set aside for the process of debt relief to run its course. The Chapter 13 bankruptcy process may take up to five years as opposed to the three to six months often required for Chapter 7 bankruptcy.

Another consideration is time. One can only file for Chapter 7 bankruptcy every six years, whereas Chapter 13 bankruptcy can be filed as often as necessary. Therefore, if a debtor has already filed for Chapter 7 and an unforeseen emergency arises, they may file for Chapter 13 bankruptcy before the six year waiting period has ended.

Filing for bankruptcy under either Chapter 7 or Chapter 13 may result in the shared consequences of temporary loss of all one's credit cards and damage to one's credit. However, they both have the advantages of putting an end to creditor harassment and organizing one's debt into manageable payments. Adequate assessment of both the pros and cons of each plan will help debtors decide which one is best for them.

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