Should I file Chapter 7 or Chapter 13?
There are many factors to consider when it comes to deciding whether a Chapter 7 or Chapter 13 bankruptcy is the best option for you. It is vital you have the assistance of a bankruptcy attorney in making this important decision, as only with a full understanding of the ramifications of each can you be sure you are making the right decision. The main differences between these two types of bankruptcy are the types of debts they include or exclude and that where a Chapter 7 completely discharges your debts, a Chapter 13 involves partial payment of them. Chapter 7 may not be available for those who make too much money, have too many assets or do not want to lose certain assets.
Chapter 13 may be a better option for you if a significant portion of your debt would not be covered by a Chapter 7, such as alimony, support payments, fines and in most cases, taxes and student loans. A Chapter 13 allows you to make payments based on what you can afford and, after a certain period, discharges the remainder of the debt. It also freezes interest at the time of filing. A Chapter 13 may also be preferable if you are behind with your car or mortgage payments and wish to avoid repossession or foreclosure.
Before taking any significant financial steps, it is imperative you have a clear understanding of the advantages and disadvantages of each of your options. The attorneys at Dodge & Vega, PLC can help you define a plan designed to resolve your unique situation and serve your best interests. Our legal team is composed of individuals who are different to typical attorneys. We are dedicated to providing personalized service and genuinely care about helping you and your family achieve a brighter future.
Chapter 7 Bankruptcy
(Liquidation or Straight Bankruptcy)
Chapter 13 Bankruptcy
(Reorganization AND Discharge of debts for an individual)
|A Chapter 7 Bankruptcy may be right for you if:||A Chapter 13 Bankruptcy may be right for you if:|
|You have little property except for the basic necessities like furniture and clothing, and/or you own real estate you are upside down in and wish to unload it.||You are behind in your mortgage payment on your residence, or behind on your car payment and you want to keep them.|
|You have little to no money left after paying basic living expenses each month not including any of your debts; or you’re not even meeting basic expenses.||You have regular income and can pay your living expenses, but you can’t keep up with payments on your credit cards or other debts.|
|You want to stop the serious consequences of a foreclosure.||You want to stop the serious consequences of a foreclosure.|
|You still need debt relief but do not qualify for a Chapter 7 Bankruptcy.|
|Chapter 7 Bankruptcy ADVANTAGES||Chapter 13 Bankruptcy ADVANTAGES|
|Most all unsecured debts are completely eliminated without making any further payments. Secured debts such as cars and houses can be kept if you are current with the payments.||You can keep most of your property or secured debts such as your house and cars even though you have missed payments.|
|This process moves very quickly compared to a Chapter 13 Bankruptcy and usually only lasts approximately 4 months before you get your discharge.||A Chapter 13 Bankruptcy allows you to catch up on past due accounts over a 3-5 year period with a payment plan that is worked out between you and the trustee. It is never something you can’t afford.|
|You will be protected from your current creditors ever contacting you again.||There is no direct contact with your creditors because you’ll simply make a monthly payment to the bankruptcy trustee who will then distribute it to your creditors according to the priority rules.|
|Co-signers may be protected.|
|Overall expense of a Chapter 7 Bankruptcy is usually cheaper than a Chapter 13 Bankruptcy.||A portion of the attorney’s fees may be rolled into the Chapter 13 plan.|
|Who is eligible to file under Chapter 7?||Who is eligible to file under Chapter 13?|
|Anyone who has not filed a bankruptcy in the past 8 years and who qualifies under the “means test” generally may file a Chapter 7 Bankruptcy.||Anyone who has not filed a bankruptcy in the past 4 years and any individual or married couple who has less than $1,010,650.00 of secured debt and unsecured debt of less than $336,900.00|
|To file in Arizona you must maintain a continual residence of at least 91 days in Arizona.||To file in Arizona you must maintain a continual residence of at least 91 days in Arizona.|
|You must complete a pre-filing session with an approved credit counseling agency (its like traffic school for credit cards).||You must complete a pre-filing session with an approved credit counseling agency (its like traffic school for credit cards).|
Determining whether to file under Chapter 7 or Chapter 13 is a decision that we can help you with. Often people still qualify and need a Chapter 7 bankruptcy. However, a Chapter 13 bankruptcy proves to be a steady and reliable method to save your house if you are late on your payments. The point is, you do not have to worry about deciding which one is best for you! You can come into one of our offices and receive a Free Consultation where an experienced bankruptcy attorney will help guide you through this process.