Chapter 13 Bankruptcy Filings Increasing

The rate of bankruptcy filings hit an all time high in 2005. Since then the rate rises and lowers across the years. One trend that has been steady is the rate of Chapter 13 filings. Until recently, Chapter 7 was the most popular. Now, the rate of Chapter 13 bankruptcy filings increasing in recent years. But why?

Chapter 13 Bankruptcy Filings Increasing

The first reason someone might file Chapter 13 instead of Chapter 7 is not passing the means test. If your income above the threshold in the means test, you cannot file Chapter 7. That leaves Chapter 13 as your only option for debt relief. In some cases, a Chapter 7 is converted to a Chapter 13 down the road. If your income goes up, you inherit some money, or your debt situation changes significantly, a case may be converted. The bottom line is that Chapter 13 has a wider reach for most people to be included.

Another reason for more Chapter 13 filings is a  matter of debt. Chapter 13 allows for debts to be included that might not be allowed in a Chapter 7 case. Secured debts, like  mortgages, are a good example. In order to keep a home that is in foreclosure you must repay the debt.  Chapter 13 allows for these payments to be spread out over a period of time. Similarly, priority debts like some tax debts or student loan debts may be eligible for Chapter 13. Basically, Chapter 13 is more flexible in what types of debt can be included compared to a  Chapter 7.

Filing for Chapter 13 is possible sooner if you have a prior bankruptcy. If you filed for a Chapter 13 in the past, you won’t have to wait as long to file again if you need to. The rule is that you must wait 2 years between a prior Chapter 13 discharge and a new one. The waiting period is 4 years from a prior Chapter 7. For anyone that needs structured debt relief through Chapter 13 can take advantage of it without having to wait a long time.

An experienced Sacramento bankruptcy lawyer can help you determine if Chapter 13 is right for you.