Depending on your financial situation, deciding to declare bankruptcy may have been easy. Choosing which type of bankruptcy to file, on the other hand, poses certain challenges. Many people are inclined to opt for chapter 7 because it discharges applicable debts immediately. Despite the repayment plan, though, there are several advantages of declaring chapter 13. A bankruptcy attorney can evaluate your specific circumstances to determine the best approach for you. In the meantime, here are some general scenarios in which chapter 13 is advisable over chapter 7.

When Should I Choose Chapter 13? 

1. When You Want to Retain Nonexempt Property

Chapter 13 allows debtors to keep all of their property, including that which is considered nonexempt. Instead of liquidating certain assets to pay back creditors, you can use your disposable income to pay for the total value of nonexempt property through the repayment plan. 

2. When You Want to Protect Cosigners

In chapter 13 proceedings, a co-debtor stay goes into effect in conjunction with the automatic stay. As long as the stay is in place, a lawyer will remind you that creditors cannot take action against cosigners. In most cases, the stay will remain in effect until the payment plan has ended. At that point, the cosigner will only be responsible for the remaining balance if it is not discharged; however, the original borrower will also be responsible for it, which still provides some level of protection for the cosigner.

3. When You Want to Catch up Financially

Whereas chapter 7 essentially provides a clean slate, chapter 13 allows debtors to catch up on their financial obligations. If you are behind on car payments, for example, you may be able to catch up by devising a strategic repayment plan. And if you owe more than the car is worth, you may be able to reduce the amount of the loan down to the value of the vehicle. The difference will then be treated as unsecured debt during the proceedings. A bankruptcy attorney can help with this approach if you qualify. 

If you want to learn more about the major differences between chapter 7 and chapter 13, turn to a bankruptcy attorney at Knochel Law Offices, P.C. With three convenient locations—in Bullhead City, Kingman, and Lake Havasu City, AZ—they represent clients throughout Arizona, California, and Nevada. Since 1987, they have been helping individuals navigate complicated legal proceedings and resolve contentious disputes, including those that fall under family law, criminal defense, personal injury law, commercial litigation, and estate planning. To request an initial consultation with a bankruptcy attorney on their team, visit their website or call (928) 444-1000.