Which One Is Better: Chapter 7 Or Chapter 13?

Posted on: 22 May 2019

If you are in the initial stages of evaluating bankruptcy as a way out of debt, you might wonder whether it is better to use Chapter 7 or Chapter 13. This is one of the first questions people ask bankruptcy lawyers when meeting with them, and the answer is always the same. It depends. Here are several factors that will help you determine which option is better for you.

The types of debts you have

To find out which one is better, you really need to evaluate your personal situation and discuss it with a lawyer. One of the top things the lawyer will ask about is the types of debts you have, as this will help you determine which is better for you. Bankruptcy classifies debts as qualifying debts and non-qualifying debts, and if you have mostly qualifying debts, filing for Chapter 7 might be better. Examples of these debts are credit card bills, personal loans, and medical bills. If you have these debts and use Chapter 7, the court may forgive all these debts, leaving you with zero balances.

If you have mostly non-qualifying debts, such as alimony, back taxes, and child support arrears, choosing Chapter 13 would likely be a better option.

The assets you have and loans on the assets

Secondly, the lawyer will ask you about your assets and loans, as this factor also helps determine which option is better. If you are caught up on your car payments and mortgage payments and want to keep your house and cars, you would probably be able to if you use Chapter 7. If you want to keep assets and are behind on your payments, filing for Chapter 13 is likely going to be your best option.  

The amount of income you have

The other factor that will affect this decision is your income amount. If you make too much money, you would not qualify to use Chapter 7, which means you would have to use Chapter 13 if you want to file for bankruptcy for debt relief. Your lawyer will need to see your pay stubs to find out which branch you qualify for.

The only way you can truly find out which option is better for you is by visiting a lawyer for a consultation visit. A lawyer will not only evaluate your situation but will also give you advice and suggestions to help you find the best way out of debt. You can get Chapter 13 or Chapter 7 bankruptcy filing assistance to help you through the process.