There are Some Individuals Who Have Sound Reasons to Consider the Alternative Presented by Chapter 13.

Many of you are already acquainted with the basic differences between the two most common bankruptcy options: Chapter 7 and Chapter 13. But for those who are not, here’s an admittedly oversimplified way to grasp the distinction: Chapter 7 allows debtors to completely erase their debts, while 13 sets up a monthly payment plan where filers hand over to creditors a specified amount of their disposable income. At first glance, Chapter 7 seems to be far and away the superior option. Why should anyone agree to repay creditors when it’s possible to make them go away altogether? Chapter 7 is, in fact, the better choice in a large number of cases, but there are some individuals who have sound reasons to consider the alternative presented by Chapter 13. Let’s look at some of the reasons why you might opt for a “reorganization” bankruptcy with help from a Long Island Chapter 13 bankruptcy lawyer.
The Means Test Makes You Ineligible for Chapter 7
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 established a “means test” to prevent high-income individuals from abusing the system by filing for bankruptcy without an urgent need for such relief. There are several aspects to the test, but the primary one is the rule that disqualifies filers if their income exceeds the median of their home state. Therefore, New York State residents cannot file for Chapter 7 if their annual income surpasses $47,790 for a one-income household (as of May 1, 2013).  The rule often causes problems for Suffolk and Nassau County bankruptcy filers, whose income tends to surpass the state average. There are exceptional cases that allow people file for Chapter 7 even if their income is too high, but this is a discussion for another day. The relevant takeaway point here is that those who get dinged by the Means Test can still file for Chapter 13.
It’s Too Soon to File for Another Chapter 7
Bankruptcy law allows individuals to file for Chapter 7 only once every eight years. This can cause problems for people who have declared bankruptcy in the past and have again accumulated unmanageable debts before year eight rolls around. However, an individual in this case is permitted to file for Chapter 13 only four years after initiating a Chapter 7 filing. If the previous bankruptcy was a Chapter 13, they need to wait only two years before submitting the papers for another reorganization plan.
You Need to Protect Your Property
Chapter 7 filers can take advantage of various exemptions provided by the law to help them retain ownership of their homes, automobiles, and other property — but in some cases it just isn’t enough. For instance, the homestead exemption generally doesn’t protect second homes. Filing Chapter 13 gives you much stronger protections when it comes to holding on to your property.
You Run a Sole Proprietorship
An individual who operates a sole proprietorship could lose it after filing Chapter 7. On the other hand, Chapter 13 will allow them to stay in business, provided that they remain compliant with the provisions they agree to in bankruptcy court.
You Need to Get Rid of a Second Mortgage
If the market value of your home is less than what you owe on a first mortgage, you can use Chapter 13 to ditch a second mortgage through a process called “lien stripping.” In this case, the bankruptcy court removes the lien from your home and turns the second mortgage into an unsecured debt.
You Need Help Managing a Non-dischargeable Debt
As anyone with student debts is painfully aware, not everything can be discharged in a Chapter 7 case. But these and certain other kinds of non-dischargeable debts can be made more manageable by setting up a five-year Chapter 13 plan where a filer can make payments at a fraction on the dollar. Similarly, filers can also use Chapter 13 to catch up on mortgage arrears.
Chapter 13 Doesn’t Stay on Your Credit Report As Long
A Chapter 13 discharge will remain on your credit report for seven years, as opposed to ten years for Chapter 7.
This isn’t a complete list of advantages supplied by Chapter 13. If you’re planning on filing bankruptcy, it’s best to retain the services of an experienced attorney who can help you decide on the best course of action. Long Island Chapter 13 bankruptcy lawyer Ronald