If you intend to file bankruptcy as an individual, there are probably only two forms of bankruptcy that you will carefully consider. Most individuals will file for either Chapter 7 or Chapter 13 bankruptcy.
Your personal situation will influence which form of bankruptcy is better for you. The following are some signs that you might benefit more from Chapter 13 bankruptcy than from chapter 7.
You are a higher-earning individual
Debt does not just develop in households with low levels of income. Those with professional jobs often incur substantial debt maintaining their work wardrobe, household and vehicle. People with career aspirations often feel like they have to “keep up with the Joneses” by buying expensive items to fit in with neighbors or co-workers.
In many families, higher income results in higher levels of household debt, rather than lower levels of household debt. If your income is above the state median, you may not qualify for Chapter 7 proceedings under a means test, making Chapter 13 the better solution.
You have almost paid off your mortgage
Your vehicle and your home are both potentially eligible for exemptions in your bankruptcy filing. However, there are fixed financial limits to those exemptions.
The higher the overall value of your property and the longer you have made payments on your mortgage, the greater the chance that a Chapter 7 filing would force you to liquidate some of the equity in your home. When you file for Chapter 13 bankruptcy, the courts will not limit how much equity you can protect if you fulfill all other obligations, such as your repayment plan.
You have valuable personal property that you don’t want to lose
Maybe you inherited your father’s collection of antique firearms or have big garage full of carefully rebuilt classic cars. If you have property with significant financial and emotional value, you may not want to liquidate or get rid of those assets as part of the bankruptcy.
A Chapter 13 filing usually will not require asset liquidation, which means that you can keep your most treasured possessions. For those with high income but high levels of debt or significant personal property, Chapter 13 bankruptcy may offer more protection then Chapter 7 bankruptcy.