Which Is The Better Option For Me?
If you are considering bankruptcy, you may have been doing your reading on both Chapter 7 and Chapter 13 bankruptcy in order to determine which is the better choice. In truth, neither is better than the other innately. It is more accurate to say that one may be better than the other depending on your situation and what you hope to accomplish from filing bankruptcy.
When is Chapter 7 Bankruptcy Better?
When someone brings up the term bankruptcy, typically it is Chapter 7 bankruptcy that most people will think of. It is a relatively quick option for those that have debt that is spiraling out of control, but it is not the perfect choice for everyone. If you have huge debts like medical bills or maxed out credit cards, then Chapter 7 is the perfect choice for you. Not all debts can be discharged, but those standard life-consuming debts can be. There is no repayment plan and your debt will be wiped out.
However, Chapter 7 bankruptcy may not be a good option for your if you own a lot of property. While Chapter 7 doesn’t mean you will lose all your property, some may be sold off, particularly if you are not current with payments or you will not be able to continue payments after bankruptcy is done. As Chapter 7 bankruptcy completely discharges debts, it will pretty much only let you keep your necessities. If you have two cars for yourself and your wife to get to work and one beautiful classic car you bought for fun, unfortunately that classic car is not considered a necessity. It will likely not be protected. However, as you both need your other two cars to get to work, then these would be considered necessities. If you enjoy your luxury items, then Chapter 7 may not be a good choice for you. It protects necessities by sacrificing what is considered to be a luxury.
When is Chapter 13 Bankruptcy Better?
Unlike Chapter 7 bankruptcy that wipes out much of your debt, Chapter 13 bankruptcy is more focused on repaying a portion of the debt. The common thought among those filing bankruptcy is “why would you ever choose Chapter 13?” It seems like it would be better to simply have your debt wiped out by Chapter 7.
However, the major benefit to filing Chapter 13 bankruptcy and setting up a three to five year debt repayment plan is that it can help you retain your property. If you own a home or a car that is behind on payments and you want to keep it, this can help you catch up on the payments you are behind on. You can keep more property in chapter 13 than in chapter 7.
Another benefit of Chapter 13 bankruptcy is if you have a lot of payments like child support or tax obligations that cannot be discharged by Chapter 7 bankruptcy. You will also want to consider Chapter 13 bankruptcy if much of your debt has a co-debtor. If you were to discharge it from yourself in Chapter 7 bankruptcy, the full burden of that debt would just go to the other debtor. For some, it may be better to think of Chapter 13 bankruptcy not as a way to discharge debt, but more as a debt management plan.
Need Help? Contact a Bankruptcy Attorney
If you are still having conflicted feelings on which chapter would be the better choice for you, then you should talk it over in full with a bankruptcy attorney. Contact us today so a professional at Walker & Walker can talk you through all of your questions to help you make the best choice. We can help go over your lifestyle so you can make the right bankruptcy decision to get your family back on track. We have offices in Minneapolis, St. Paul, Blaine and Brooklyn Park.
