If you are considering filing for bankruptcy, you may be wondering which chapter is best. While many people assume that Chapter 7 is the best way out from under debts, Chapter 13 can often offer more benefits.
Keeping Your Property
When you take out a mortgage or car loan these items are used as collateral on the loan. Defaulting on a secured loan means that the lender has rights to seize this property. In other words, defaulting on a mortgage payment leads to foreclosure and missing a payment on a car loan leads to repossession. The biggest complication people face in a Chapter 7 bankruptcy is how to protect their secured debt property.
Filing for Chapter 13 bankruptcy can ensure that your home, car, and much of your other personal property is safe from the hands of creditors. This is because Chapter 13 includes a repayment plan designed to roll your missed payments into one monthly payment that is divided among creditors by the trustee. As long as you keep up your Chapter 13 payments as outlined in the plan, creditors cannot touch your property.
Although it is true that bankruptcy exemption laws can protect much of your assets in a Chapter 7 case, each state has varying bankruptcy exemption laws. Ohio bankruptcy exemption laws are not very broad in the sense that they offer just slightly above what is offered at the federal level. Therefore, most people find that protecting secured debts in bankruptcy is best managed in a Chapter 13 case.