Chapter 7 VS Chapter 13

Michael Daniels Law

Chapter 7 vs Chapter 13


Individuals can file Chapter 7 or Chapter 13 bankruptcy. To qualify for Ch. 7 you will need to pass what is called the “Means Test” to determine whether you income is low enough. If your income is above the median income for a family the size of your household, you may be ineligible to file for Chapter 7. In that case you will probably be able to file for Chapter 13 bankruptcy.

Any decision you make will be momentous, and it should be fully informed. Michael Daniels is Chapter 7 bankruptcy lawyer who has helped hundreds of people get debt relief, providing skilled bankruptcy law services in Albuquerque and New Mexico for more than 30 years. 

If you want to discuss whether a bankruptcy might be the right solution for you, call 505-246-9385 or email to set up a free consultation today

What happens if Filing Chapter 13 Bankruptcy Filing Chapter 7 Bankruptcy
You're behind on your mortgage or car loan. By filing chapter 13 bankruptcy you can repay the arrears through your plan, over 3 or 5 years, and keep the house/car. By filing chapter 7 bankruptcy you'll have to bring the loan current shortly after filing the case or the lender will obtain the court's permission to take possession of the house/car.
You owe back taxes to the IRS. The results depend on your circumstances under chapter 13 bankruptcy. The result depends on your circumstances under chapter 7 bankruptcy.
You have valuable nonexempt property. Filing chapter 13 bankruptcy allows you to keep all of your property. Filing chapter 7 bankruptcy means you must give it up, pay the trustee its fair market value or, if the trustee agrees, swap exempt property of equal value for it.
You have co-debtors on personal (non-business) loans. Filing chapter 13 bankruptcy ensures that the creditor may not seek payment from your co-debtor for the duration of your case. The creditors will go after your co-debtor for payment if you file for chapter 7 bankruptcy.
Your current monthly income does not exceed the median family income for your state. If you choose to file Chapter 13 bankruptcy, you may propose a 36 month repayment plan. You are allowed to file under Chapter 7 bankruptcy.
Your current monthly income does exceed the median family income for your state. Filing chapter 13 bankruptcy will mean you must propose a 60 month repayment plan. If further means testing shows you can fund a Chapter 13 bankruptcy plan, the court will dismiss your Chapter 7 bankruptcy case unless you convert it to Chapter 13.
You received a bankruptcy dismissal in the past year. The automatic stay expires after 30 days as to debts/collateral for debts, unless the prior case was a Chapter 7 dismissal for "abuse". The automatic stay expires after 30 days as to debts/collateral for debts.
You received two or more bankruptcy dismissals in the past year. The automatic stay does not take effect, unless the prior case was a Chapter 7 dismissal for "abuse". The automatic stay does not take effect when filing chapter 7 bankruptcy.
You received a previous bankruptcy discharge. You can't receive a new Chapter 13 bankruptcy discharge if your prior Chapter 7 discharge was in a case filed less than 4 years ago or if your prior Chapter 13 discharge was in a case filed less than 2 years ago. You can't receive a new Chapter 7 bankruptcy discharge if your prior Chapter 7 discharge was in a case filed less than 8 yrs ago; or if your prior Chapter 13 discharge was in a case filed less than 6 years ago (unless you repaid at least 70% of your allowed unsecured claims).
You owe debts for past due or future "domestic support obligations," such as alimony or child support. These debts can be included in your Chapter 13 bankruptcy repayment plan, but any unpaid balance cannot be erased. Filing chapter 13 bankruptcy means unpaid domestic support creditors will be allowed to proceed against your exempt property to collect the unpaid debt. During the case, your failure to pay post-petition support will prevent confirmation, will prevent entry of your discharge order, and may result in the dismissal of your case. These debts cannot be erased by filing Chapter 7 bankruptcy. Even worse, filing chapter 7 bankruptcy will allow domestic support creditors to proceed against your exempt property to collect the debt.
As part of your divorce settlement or divorce decree, you must pay certain debts (such as credit card balances), or if you owe money to your ex-spouse to even-up your property settlement. These debts can be included in your Chapter 13 bankruptcy repayments plan. If you do not pay them in full during your case, any unpaid balance is wiped out at the end of the case. These debts cannot be erased by filing Chapter 7 bankruptcy.
You owe debts for:
  • student loans
  • court-ordered restitution or criminal fines
  • dues/assessments owed to a homeowner or condominium owner association
  • taxes less than 3 years past due
  • debts for personal injuries arising from your DWI/DUI
These debts can be included in your Chapter 13 bankruptcy repayment plan, but any unpaid balance cannot be erased. These debts cannot be erased by filing Chapter 7 bankruptcy.
You have debts incurred just before filing, including debts of $500 or more to a creditor for luxury goods or services purchased within 90 days before filing, or debts for cash advances of $750 or more obtained with 70 days before filing. These debts can be included in your Chapter 13 bankruptcy repayment plan, but cannot be erased if the creditor objects and proves your bad acts to the court. These debts cannot be erased by filing Chapter 7 bankruptcy.
You have debts from willful/malicious injury to property, or to a person who has not yet been awarded damages or restitution by a court. These debts can be included in your Chapter 13 bankruptcy repayment plan. If you do not pay them in full during your case, any unpaid balance is wiped out at the end of the case. These debts are not dischargeable if the creditor objects and proves your bad acts to the court.
You have debts incurred by fraud theft, breach of trust, embezzlement, or for willful/malicious injury to another person or their property. These debts can be included in your Chapter 13 bankruptcy repayment plan, but cannot be erased if the creditor objects and proves your bad acts to the court. These debts are not dischargeable if the creditor objects and proves your bad acts to the court.
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