The difference lies in the ability to qualify for filing a Chapter 13 bankruptcy, which should be determined by experienced bankruptcy lawyers in Phoenix, AZ. In short, if the individual qualifies for Chapter 13, then their credit standing is already damaged. Even when an individual has a steady income, if their debts are so overwhelming that they qualify for Chapter 13, it is unlikely that they would be able to successfully complete a repayment plan without support and protection from the court.
By filing for Chapter 13 and accepting court oversight, an individual receives at least 3 benefits. First, they are under court protection during the repayment period and therefore relieved of other prosecution or harassment attempts. Second, they may be required to repay only fractions of the outstanding debt as determined by the court and therefore repaying a lesser amount. And third, the individual can begin rebuilding credit when the court oversight is concluded, and therefore improve their credit more readily. Without the bankruptcy filing, damaged credit will continue for years without much chance for improvement.
