Chapter 13 vs Chapter 7

For most people, their available Chapters of the Bankruptcy Code under which they can file for bankruptcy boil down to 2 choices: Chapter 7 versus Chapter 13 bankruptcy. These are, by far, the most common types of bankruptcy filed in the United States. More than 99% of all bankruptcies filed in the United States are filed under Chapter 7 and Chapter 13. San Diego bankruptcy filings are also about 99% Chapter 7 and Chapter 13 cases. The other 4 types of bankruptcy (there are a total of 6 types of bankruptcy) are very rare and are usually reserved for large corporations (Chapter 11) (also available to individuals but the high expense of such cases makes it a very impractical solution), farmers and ranchers (Chapter 12), municipalities (Chapter 9), and cross-border cases (Chapter 15).

When to File Chapter 7 vs Chapter 13 Bankruptcy

So if you are among the more than 99% of San Diego bankruptcy filers who must choose between Chapter 13 vs Chapter 7, you may be asking yourself, “which is better, Chapter 13 versus Chapter 7?" To truly answer the question, you will want to discuss your case with a bankruptcy lawyer, who will consider your individual circumstances and your reasons for filing bankruptcy. While there is no one single factor or rule for deciding when to file Chapter 7 vs. Chapter 13 bankruptcy, there are general principles that you can expect your bankruptcy lawyer to consider in a typical case in deciding whether Chapter 7 or Chapter 13 is the more beneficial solution for you. Here are the main reasons you might choose Chapter 13 vs Chapter 7, or vise versa:

When to File Chapter 7

Chapter 7 is generally the preferred choice for those who just need to eliminate their credit card debt or other unsecured debt. Unsecured debt means debt that is not secured against property that you own. Other common examples of unsecured include: personal loans, medical bills, or a judgment that has not been recorded against your property. (By contrast, common examples of secured debt are a home mortgage loan or a car loan.)

If you don’t own a home, or if you do own a home but you are on time on your payments, your bankruptcy attorney may recommend that you file under Chapter 7 to eliminate your credit card debt and other unsecured debt.

When to File Chapter 13

Chapter 13 is generally the preferred choice if you own a home and are behind on your mortgage payments and trying to stop foreclosure. If you are behind on your mortgage payments, your bankruptcy lawyer will usually recommend that you file under Chapter 13 and repay your missed payments over time. This will save your home from foreclose.

The reason that a Chapter 13 can save your home from foreclosure is straightforward. In a Chapter 13, you must propose a viable Chapter 13 Plan that repays all of your missed mortgage payments, and any missed property taxes, over a 3-5 year period. This results in you becoming current on your home loan, and property taxes, so there is no longer a reason for your lender to foreclosure.

There are other reasons why you may want to file Chapter 13 over Chapter 7, or vice versa. For example, your income may be too high to pass the Mean Test and qualify for Chapter 7 relief, or you may have too much debt to qualify for Chapter 13 relief.

Another common reason that your attorney will recommend Chapter 13 over Chapter 7 is if you are trying to eliminate a 2nd mortgage or Home Equity Line of Credit (HELOC) through lien stripping. Lien stripping is a form of loan modification in bankruptcy in which you can reduce or eliminate your 2nd mortgage or HELOC under appropriate circumstances. You cannot perform a lien strip in a Chapter 7 case.

Keeping Your Assets

Regardless of which Chapter you file under, Chapter 13 vs Chapter 7, with the help of an experienced bankruptcy attorney you can usually keep all of your assets (your home, your car, your business, and your other assets) when you file for bankruptcy under Chapter 7 or Chapter 13 in San Diego.

Your Needs and Goals

Before even considering the issue of Chapter 13 vs Chapter 7 bankruptcy, you and your attorney need have a clear understanding of what your needs are and what you are trying to accomplish with your bankruptcy filing.

Once you and your attorney are clear on what your specific needs and goals are, your attorney will consider a multitude of factors, and carefully consider your needs and goals, in order to give you the best recommended course of action.

Free Consultation

Both Chapter 7 and Chapter 13 can help you get out of debt San Diego and get a fresh financial start. Contact Bankruptcy Legal Center today to set up a free consultation with a San Diego bankruptcy lawyer to determine if Chapter 7 vs Chapter 13 would be most beneficial considering your needs and goals.

"From our first meeting, Mr. Aalam was most helpful in explaining the bankruptcy process, my options within the process and the road ahead toward my bankruptcy filing. I did not have to research any of this on my own as my bankruptcy lawyer told me what was needed for my bankruptcy filing and his office staff kept me aware of court dates and filings through email and phone calls. I would without hesitation, recommend Mr. Aalam to my friends and family to be their bankruptcy lawyer."
-Tom, San Diego, CA.

"If you are looking for an honest attorney to help you file bankruptcy then you need to call Mr. Aalam. He was my attorney on my case and I felt extremely secure and confident. Mr. Aalam was very professional and knowledgeable and I always felt as though he genuinely cared about my case. I recommend him to everyone who is looking for a bankruptcy attorney."
-Nellie, San Diego, CA.

Bankruptcy Legal Center BBB Business Review