There are many differences between these two types of bankruptcies and many reasons to pick one over the other. Here is my list of 13 reasons that a Chapter 13 might be the right choice:
- Flexibility: you can dismiss the case at any time or even convert it to a Chapter 7. You can modify a plan if income changes or you decide to give up a house or a car. You can refinance or sell a house during the plan.
- A Chapter 13 will save a house from foreclosure as long as you can make the payments.
- You can strip a wholly unsecured second mortgage; or value a car if you’ve had it more than 910 days.
- You can challenge the costs added to your mortgage by the lender.
- Trustees want the plan to succeed and will work with you to get it confirmed.
- There are more debts that can be discharged including some divorce payments and damages for malicious and willful acts.
- Your attorney’s fees can be spread out rather than all due before filing.
- A Chapter 13 can be filed for one spouse even when married. (This is true of Chapter 7s also, but there are more advantages to having one spouse in a Chapter 13 plan.)
- You can avoid having to reaffirm a car in order to keep it.
- You can cure a tax problem or a Domestic Support Obligation (child support or alimony) over 60 months.
- You can stretch out your payments for a car or other secured debt.
- You wont lose non-exempt property.
- Depending upon your income a Chapter 7 case can be challenged by the US Trustee, but not a Chapter 13.
This list is not meant to be exhaustive of all of the advantages of filing a Chapter 13 instead of a Chapter 7. As with all legal problems like this one, its always best to consult a competent bankruptcy attorney in your area.