Should I File Chapter 7 or Chapter 13?

chapter 7 or chapter 13

Some people that file for bankruptcy have a choice of filing Chapter 7 or Chapter 13. For others, the option to file a Chapter 7 may not be available to them, or it may not be a good option and Chapter 13 may be more appropriate given their situation.

Examples of people ineligible for a Chapter 7 discharge include those who filed a previous Chapter 7 less than eight years ago and received a discharge, those who filed a previous Chapter 13 less than six years ago and received a discharge, and those who have too much income.

Examples of people for whom Chapter 7 may not be a good choice include (a) those who have a lot of valuable non-exempt assets such as motor vehicle equity, or signifcant amounts of household goods, furnishings, appliances, art and/or jewelry (see previous blog post What are exemptions and why are they mportant), (b) those who have made payments, or transferred anything of value, to friends or family members in the past four years, (c) those who owe large equitable distribution obligations to an ex-spouse, and (d) those who have allowed friends or family members to put assets under their name such as real estate or motor vehicles.

Lastly, some people that are eligible for Chapter 7 and don’t have any of the potential problems listed in the previous paragraph may still opt for a Chapter 13 because of the benefits a Chapter 13 plan of reorganization offers. These benefits include the ability to catch up on past due auto or mortgage debt payments, the ability to lower or strip down the balances owed on older cars (see previous blog post: How can a chapter 13 bankruptcy help me keep my car.) and non-homestead real property, and the ability to pay no-dischargeable debts such as alimony, child support of federal income taxes over time.

If you cannot pay your debts as they come due, call our office and we will schedule you a free, confiential and comprehensive consultation.

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