Should I File A Chapter 13 Or A Chapter 7 Bankruptcy

You must ultimately decide for yourself whether filing bankruptcy is the proper action to take, and if so, which Chapter is better for you. Some of the factors to consider are as follows:

 1. If you are not making more money than you need for your current living expenses, Chapter 13 is not a realistic option.

 2. Chapter 7 has the advantage of wiping the slate clean and enabling you to embark on your "fresh start" immediately; whereas with Chapter 13 you will be making payments for some period of time.

 3. If you have a particular asset that is above the allowable exemption that you want to keep, then Chapter 13 may be the only alternative. For example, if you are single, own a residence with $30,000.00 in equity and don't want to have it sold, Chapter 7 is not right for you.

 4. If you are trying to ward off a repossession or a foreclosure, Chapter 13 may be the only way to do so.

 5. Fees are generally higher to file a Chapter 13 (the standard fee is $3,000). The standard fees for the normal Chapter 7 is $1,000-$1,500. However, we usually require the entire fee to be paid in advance in Chapter 7 cases. In Chapter 13 cases, we usually require only a portion of the fees to be paid prior to the filing of the bankruptcy, with most of the fee paid through your Chapter13 plan.

6. In certain circumstances, Chapter 13 is more advantageous because it allows you to keep secured property, such as houses and vehicles, by paying less. The three most prevalent circumstances are:

a. If the retail, replacement value of a vehicle is less than the amount of the debt, and the claim is not a 910-vehicle claim, you can keep the vehicle by paying that value rather that the full amount of the debt.

b. On some secured debts, if the interest rate is high, you can reduce the interest rate.

c. If you have more than two mortgages on your residence, and the value of the residence is less than the amount owed on the first mortgage, you can “strip-off” the second mortgage and treat it as an unsecured claim. For example, if your residence is worth $220,000 and it is encumbered by a first mortgage with a balance of $225,000 and a second mortgage with a balance of $25,000, you can strip off the second mortgage and quit making payments on it.

**The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.**