You may be eligible for either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Therefore, it becomes simply a matter of which type you want to file for. While there are many things to consider, one is that you can, in some cases, save assets that you own when you decide to use Chapter 13. If you use Chapter 7 in the same situation, you may lose those assets.
The reason for this is that a repayment plan is used with Chapter 13, whereas assets are liquidated with Chapter 7. After a Chapter 7 filing is complete, you essentially have no more debt except for things that can’t be included, like student loans. After a Chapter 13 filing, you still have debt, but you have a manageable repayment plan that you can afford.
For example, if you own something like a sailboat or a sports car, you may need to liquidate it with Chapter 7. Items that you need are typically exempt, but these extras may not be. Therefore, the car or the boat will be sold and the money will be given to your creditors to reduce your debt.
With Chapter 13, though, you simply group your debt into a lump sum and then make payments each month that will pay it off after a set period of time like five years. You don’t have to give up your assets since your creditors don’t want to be paid all at once. You can keep them and use the income that you earn for the next five years to make your monthly payments.
All cases are a bit different, but you can see how Chapter 13 may be preferable if you have assets you want to preserve. Be sure you know how all types of bankruptcy work in New York so that you can pick the proper one. A bankruptcy attorney can help you with this important decision.
Source: Credit.com, “Filing Bankruptcy: What You Need to Know About Chapter 7 vs. Chapter 11 vs. Chapter 13,” Gerri Detweiler, accessed Feb. 26, 2016