Reasons to File for Chapter 7 Bankruptcy Instead of Chapter 13

Filing for bankruptcy can be understandably unnerving, but knowing which type of bankruptcy you should file for can put your mind at ease. If you meet the required income limitations  and don’t mind potentially losing a little property, there are many reasons to file for Chapter 7 bankruptcy instead of Chapter 13.

Advantages of Choosing Chapter 7 Bankruptcy

  1. Clean Slate.  The entire purpose of Chapter 7 bankruptcy is to give the debtor a fresh new start by eliminating dischargeable debt and making it easier to focus on other non-dischargeable debts, like student loans or child support. Once your dischargeable debt is gone, it’s gone. You get a clean slate to focus on your future.
  2. Property Retention.  Any property that you attain after 180 days from filing will not be included in your bankruptcy estate unless the property in question was inherited, part of a divorce settlement or decree, part of death benefits, or earnings from an existing life insurance policy.
  3. No Limits.  Chapter 7 bankruptcy guidelines do not enforce debt limits on potential filers, meaning you can file no matter how much debt you have.
  4. No Repayments.   With Chapter 7 bankruptcy, once your debt has been discharged you are no longer responsible for it. You will not have to make payments as part of a court-approved repayment plan like you would if you filed a Chapter 13 bankruptcy.
  5. Faster Discharges.  With Chapter 7 bankruptcy, you may see your debt discharged in as little as 90 days. Once you file, the court will issue the order. After your property has been appropriately distributed to the rightful unsecured creditors by your appointed trustee, your case will be closed.

Disadvantages of Choosing Chapter 13 Bankruptcy

  • You must file as an individual.
  • You must meet specified debt limitation requirements in order to file, meaning any unsecured debt you have must never exceed $336,900 and any secured debt you have must never exceed $1,010,650.
  • You must repay creditors using a sanctioned 3-5 year repayment plan. You must also have sufficient income to make those payments every month. Secured creditors and priority debts must be paid in full while unsecured creditors should receive a total amount equal to that of what would have been received from the sale of property if a Chapter 7 bankruptcy has been filed.

If you are unsure of which type of bankruptcy you should file for or you would like more information on what it means to file for bankruptcy, we urge you to consider seeking professional bankruptcy advice from our trained bankruptcy attorneys at Church and Korhonen, PC. Call Church and Korhonen, PC, toll-free at 1.800.758.5611 or simply fill out the form in the sidebar to begin taking steps to a more sound financial future, greater peace of mind and a fresh start.