Five Reasons to File Chapter 13 Bankruptcy Instead of Chapter 7

In certain situations Chapter 13 bankruptcy is the best option for debtors, and at other times, it is the only option. Let’s look at when Chapter 13 bankruptcy is better than Chapter 7.

Do You Have Property That Can’t Be Protected in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy only allows you to protect certain assets, such as your personal residence and car. Anything else can be lost to the bankruptcy trustee. In contrast, Chapter 13 allows you to keep any property and still file for bankruptcy. 

Do You Have a Co-debtor?

 A co-debtor’s obligation to repay on a debt he or she shares with you is not eliminated when you file for Chapter 7 bankruptcy. However, in Chapter 13 bankruptcy, this debt will be eliminated for both of you as long as you make your Chapter 13 monthly plan payments.

Are You Behind on Your Mortgage or Car?

When you are behind on your mortgage or car payments, Chapter 13 will allow you to make up the missed payments over time and still receive bankruptcy protection. This is in contrast to Chapter 7, where a late payment can mean losing your car or home.

Do You Have Student Loans, Owe the IRS, or Have Other Debts That Can’t Be Discharged in Chapter 7? 

There are many forms of debt that cannot be eliminated in Chapter 7 bankruptcy. If you have debts of this type, you may consider filing Chapter 13 bankruptcy which allows these debts to be repaid through your Chapter 13 payment plan over time.

Are You Ineligible for Chapter 7?

There are times when you just can’t file for Chapter 7 bankruptcy. If your income is too high to qualify, or if you filed a Chapter 7 bankruptcy in the last 8 years, you will not be allowed to file Chapter 7. This will leave Chapter 13 as your only bankruptcy option.