For some debtors, if they were to choose between Chapter 13 and Chapter 7 bankruptcy, the former is the way to go. On some occasions, it might be the only option if one is not eligible for Chapter 7 bankruptcy.
When it comes to sorting your options and issues on bankruptcy, it pays to determine which is best for you. A number of debtors think that Chapter 7 is better because it does not require debtors to repay a portion of the debt, unlike Chapter 13.
Still, this is not always the case.
When You Cannot Choose 7
Some debtors cannot file for Chapter 7, which leaves 13 as the sole option. Godfreylawyers.com, a Chapter 13 bankruptcy lawyer in Ogden, states that you cannot file for 7 if the following are true:
- Your current monthly income over the six months before your filing date surpassed the median for household income.
- Your disposable income exceeds limits of the law.
Calculations often involve the “means test”. If you can repay the amount of debt you have through your Chapter 13 repayment plan, you fail the test. This test is complicated and Congress’ definition of “disposable income” makes everything more difficult.
When 13 is the Better Option
Even if you are eligible for Chapter 7 bankruptcy, filing for 13 instead is advantageous in some occasions. For example, if you have a tax obligation or a student loan and wish to make up for missed payments, 13 is your best option. With Chapter 7, you cannot reinstate the original agreement, unlike in 13.
Chapter 13 also works best if you have nonexempt property you wish to keep. When you file for bankruptcy under Chapter 7, you keep the exempt but must give the nonexempt property to a bankruptcy trustee, who will sell it on your behalf.
Under 13, however, you need not give up the property. Instead, you pay the debts out of your income.
While Chapter 13 has numerous benefits over 7, it still pays to determine which bankruptcy plan works best for you. Seek help from your nearest law practice to achieve results in your favor.