Chapter 7 or Chapter 13
Thomas P. Riley Law Office is here to help you find the right path and guide you out of the woods. Read through our guide below and learn how to differentiate between Chapter 7 and Chapter 13 Bankruptcy options and decide which one is the right option for your unique circumstances.
How to choose between Chapter 7 and Chapter 13
Before filing, we will take the time to meet with you to discuss your situation and your options. We will also discuss with you whether a Chapter 7 or a Chapter 13 bankruptcy is appropriate for your situation.
Chapter 7 and Chapter 13 both have their advantages and disadvantages. Each offers a unique way to discharge most (if not all) of your debts. The most obvious difference between these two types of bankruptcy is that you will make monthly payments to the Trustee in a Chapter 13, but will be able to protect your nonexempt assets from seizure by the Trustee. Under Chapter 7 some of your nonexempt assets may be subject to seizure in order to pay your creditors, but you will not be responsible for making monthly payments as you would under Chapter 13 Plan.
In many cases, we are able to exempt all or most of your assets in the filing process and protect them from seizure. There are income limits that may prevent you from filing a Chapter 7. If your income is higher than the median income level, you may still qualify if we can show that you do not have the means to make the required payments in a Chapter 13 (this is the called "means test").
In other cases, the client may have nonexempt assets or partially nonexempt assets that they wish to keep. In those instances, a Chapter 13 is preferable in order to protect those assets. A Chapter 13 also ensures that you will pay off more debts that are otherwise nondischargeable in a Chapter 7. For instance, if you are behind in your child support, alimony payments, or taxes, we can create a Chapter 13 Plan that will bring you up-to-date on those debts, while in a Chapter 7, you will still owe those debts once the case is closed.
If your bank is about to foreclose on your home, a Chapter 13 bankruptcy can also allow you to keep your home. If the bank has already repossessed your car (but has not yet sold it), or is about to repossess the vehicle, a Chapter 13 bankruptcy may allow you to keep the car. If the car has already been repossessed but has not yet been sold, we can even force the bank to return the vehicle to you.
Setting up a free consultation with us will allow us to go over your financial situation with you to determine whether you are eligible to file a Chapter 7, or if you have nonexempt or partially nonexempt assets that you wish to protect under a Chapter 13 restructuring. Use the contact information below to set up a consultation.