Chapter 7 or Chapter 13: How do you decide?

The United States Bankruptcy Code is divided up into various chapters. Each of these chapters deal with a different type of bankruptcy.

Over time, we have come to refer to each type by its chapter number. Most people are familiar with chapter 7 and 13 bankruptcies because these are the most common forms for individual debtors.

In other blogs we’ve discussed the difference between these two chapters. Today, we want to get more specific and talk about how people decide which chapter is right for them.

Do I Flip A Coin?

As with most things in life, the chapter decision can range from simple to very complicated based on your situation and desired outcome. While a chapter 7 is liquidation and a chapter 13 is repayment, there is some wiggle room in how to use these to result in different outcomes for you.

One example would be if you have limited income, but you have high equity in your home. Here your first instinct may be to do a chapter 13 to save the home. The difficulty is that your monthly payment for the chapter 13 may be higher than you can reasonably afford. Therefore, you may want consider other options. These could range from refinancing to selling the home and completing a chapter 7.

On the other hand you may have low income and low equity in your home. In this situation a chapter 7 could be filed and you could reaffirm the debt to keep your home.

How to Decide?

When it comes to bankruptcy, there are no one-size-fits-all solutions. This is good however, because it allows you to handle your personal situation in a manner that gets you closer to your own desired goal. When you meet with our attorneys, they will ask questions about your assets, liabilities, and goals.

By doing this they can give you different options on how to proceed and help you make the best decision for you and your family. Once you have the information and our recommendation, you’ll be able to make a better decision about which path is best for you.

If you have any questions or are considering bankruptcy, please contact us at 219-615-0064.