Which Bankruptcy Filing Is Right For Me?

Chapter 7 v. Chapter 13: Find the Right Bankruptcy Filing for You

How are Chapter 13 and Chapter 7 bankruptcy filing?

• Creditors are prohibited from contacting you while under the protection of the automatic stay, which goes into place upon the filing of either chapter; and
• Completion of the Credit Counseling Class is required to be completed prior to either bankruptcy filing.

How does Chapter 13 differ from Chapter 7 for a debtor?

• In a Chapter 7 filing the debtor’s nonexempt property (if any exists) is liquidated to pay as much as possible of the debtor’s debts, while in most Chapter 13 filings a portion of the debtor’s future income is used to pay as much of the debtor’s debts as is feasible considering the debtor’s circumstances;
• A Chapter 13 normally lasts much longer than a Chapter 7 case and is usually more expensive for the debtor; and,
• Co-signers of secured debts may be protected under a Chapter 13 filing, while they may not be in Chapter 7.

When is Chapter 13 preferable to Chapter 7 for a debtor?

Chapter 13 is usually preferable for a person who:

• is not eligible for filing under Chapter 7;
• wishes to repay all or most of his or her unsecured debts and has the income to do so within a reasonable time, usually 3 years or less;
• has valuable nonexempt property, or has valuable exempt property securing debts, either of which would be lost in a Chapter 7 filing;
• has one or more substantial debts that are dischargeable under Chapter 13 but not under Chapter 7; or
• has sufficient assets with which to repay most debts, but needs temporary relief from creditors.

How does Chapter 13 differ from a private debt consolidation service?

In a Chapter 13 case, the bankruptcy court can provide aid to the debtor that private debt consolidation services cannot provide. For example, the court has the authority to prohibit creditors from attaching or foreclosing on the debtor’s property, to force unsecured creditors to accept a Chapter 13 repayment plan that pays only a portion of their claims, and to discharge a debtor from unpaid portions of debts. Private debt consolidation services have none of these powers.