Why Do People Choose Chapter 13 Over Chapter 7?

Law Blog

If you quickly compare Chapter 7 bankruptcy versus Chapter 13, you might agree that Chapter 7 looks more beneficial. While this is true for many people and situations, there are times when people may prefer using Chapter 13. Why is this? Why would someone choose Chapter 13 instead of Chapter 7? If you would like to find out, continue reading.

Some People Do Not Meet the Eligibility Requirements for Chapter 7

Before a bankruptcy attorney tells a person which branch you can use, they will complete a means test. This test tells the attorney about the person's income in comparison to the average income in the location. A person cannot use Chapter 7 if they do not pass this test. To pass it, they must earn less than the average income. Therefore, many people must use Chapter 13 if they want to file. Some people might qualify for both options, but they might still choose Chapter 13 for various reasons.

You Cannot Stop a Foreclosure with Chapter 7

When a person is on the verge of a foreclosure, Chapter 7 will not permanently stop it from going through. On other hand, Chapter 13 can stop a foreclosure. As a result, people might choose Chapter 13 primarily to stop them from losing their homes. If you want to keep your home but are worried that you might lose it to a foreclosure, you might want to use Chapter 13.

Some Prefer Repaying Their Debts

There are also situations when people prefer repaying the money they owe instead of accepting forgiveness for it. While these situations are not overly common, they do occur occasionally.

Chapter 7 Helps with Certain Debts

The other thing to realize is that Chapter 7 has limits when it comes to the assistance it offers. If you owe a lot of money to credit card companies, for example, Chapter 7 might be a great solution. When you owe money for debts that do not provide a discharge through Chapter 7, you might want to consider Chapter 13 instead. Chapter 13 can assist with all debt types as it has no limits on what debts you can include in your plan.

As you read this guide, you might understand why some people use Chapter 13 bankruptcy instead of Chapter 7. If you would like to learn more about your options, contact a bankruptcy attorney today. Reach out to a Chapter 13 bankruptcy attorney near you to learn more.


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