Chapter 13 Bankruptcy Protects Non-Exempt Assets

Chapter 13 bankruptcy is a way of writing-off personal debt whilst protecting non-exempt assets, such as a second home, jewellery or a valuable personal collection.

Why Chapter 13 Bankruptcy, Not Chapter 7?

Whilst approximately 65% of those with serious personal debts choose to file for bankruptcy under chapter 7, this isn't always possible. The two main reasons for this are:

Income above state median: If income is above the median for your state, it may not be possible to file under chapter 7. However, it is advisable to consult an attorney to see if they are able to find a legal way of reducing your income.

Non-exempt assets: Choosing to file for bankruptcy under chapter 7 will not be permitted by the judge if it is deemed that certain assets could be sold to pay-off creditors. In this instance, the judge may recommend an alternative debt solution.

Benefits of Chapter 13 Bankruptcy

Provided a pre-agreed monthly payment is made from disposable income to creditors each month, chapter 13 has the following advantages:

- The trustee won't sell non-exempt assets and distribute the income to creditors. This means that those who file due to unsustainable personal debt won't have to start their financial life completely from scratch.

- Opting to file for bankruptcy under chapter 13 will show on your credit report for 7 years. It will show for 10 years under chapter 7. Continuing to make payments punctually will mean that a FICO score starts to improve after just a couple of years.

- You will become debt-free in just 3 to 5 years. At the end of the specified period, any remaining personal debt will be completely written-off.

- Filing can prevent mortgage foreclosure whilst personal finances are restructured. Full court protection is provided whilst a suitable repayment plan is drawn-up.

Chapter 13 bankruptcy is the right solution to serious personal debts when the eligibility criteria isn't met for chapter 7. It allows the debtor to keep non-exempt assets and make an affordable monthly payment to a trustee. The insolvent will enjoy full court protection from creditors and collection agencies.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.