Chapter 13 Foreclosure VS Chapter 7

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Anyone deciding to file for bankruptcy will very quickly discover that there are a number of different forms of bankruptcy that they can file. For an individual, Chapter 7 is, by far, the most popular filing in the country.

There is a good reason why Chapter 7 is the most popular type of bankruptcy filed. And that is because it provides them with the opportunity to virtually get rid of all of their debts and begin their financial life with a pretty much blank slate. Regrettably, this kind of bankruptcy has some financial limits which you have to fulfill in order to file. If you don't meet these financial criteria, the court will probably force you to file under Chapter 13 which is really more of a reorganization plan that rearranges your debt as opposed to discharging them.

On the other hand, other consumers may feel that they would be better off filing under Chapter 13. Particularly if they have a great deal of assets. Its main benefit is that it allows you to hold on to all of your possessions while you are under the bankruptcy protection. But, there are additional benefits also.

First of all, Although Chapter 13 will not discharge all of your debts, it can reduce the amount of debt that you owe on some of them. For instance, assume that in 2009 you purchased a new car, let's say a Nissan Sentra, for about $22,000. But, a year later the car is only worth around $13,000 even though you still owe $17,000 or more on it.

If you file for a Chapter 13 bankruptcy, you could possibly have your debt amount reduced to $13,000, i.e. the real resale value of the automobile at the time of your filing. In addition, you could have the terms of the payment renegotiated to make it easier for you to pay. That's because the primary aim of Chapter 13 is to keep you solvent so that you have the ability to pay off your creditors under the re-negotiated terms.

But automobiles are simply an example. The really nice thing about this type of bankruptcy filing is that it allows you to reduce the amount of money you owe on all sorts of items whose value is no longer worth as much as when you bought them. So, in effect, you could have your overall debt reduced by thousands of dollars.

Another way that this type of filing helps is that it gives you time to make up payments that you may have missed on a debt. Say, for instance, that you purchased a number of furniture sets for various rooms in your home for which are late in making a number of payments. The bankruptcy re-organization can take the sum total of your late payments and spread them out over the coming 3 or 5 years, making it much easier to pay them. And making it easier to pay your debts while at the same time maintaining your solvency is really what Chapter 13 is all about.

Article Source: http://depositarticles.com/

David Hoyer is a freelance writer who writes articles relating to filing bankrupt and types of bankruptcy and other financial issues. Visit his site at bankruptcyfocus.com .

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