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Chapter 7 vs. Chapter 13: The better choice for debtors

Are there any good reasons to file for Chapter 7 bankruptcy instead of Chapter 13? Your attorney may have spoken to you about the differences in the bankruptcy types, and knowing that Chapter 7 bankruptcy is liquidation bankruptcy may make you fear that you'll lose out. The truth is that Chapter 7 bankruptcy can be the better option.

Is Chapter 7 bankruptcy sometimes better than Chapter 13?

Yes, in some ways. Chapter 7 bankruptcy allows you to discharge all or most of your debts, while Chapter 13 focuses on repaying debt.

Why do people choose Chapter 13 bankruptcy over Chapter 7?

Sometimes, the problem is with income limitations. If a person has too much money coming in, he or she may not qualify for Chapter 7 bankruptcy.

Usually, money a person makes after filing for Chapter 7 bankruptcy is not able to be taken during the bankruptcy, helping him or her stay financially stable outside the bankruptcy itself. There is also no repayment plan, so once the debts are discharged, there are no further payments to be made. A person may choose this plan instead of a Chapter 13 bankruptcy, because in Chapter 13 bankruptcies, debtors must repay creditors over three to five years. Sometimes, selling properties and discharging debts in Chapter 7 bankruptcy is simply a better arrangement, since it takes place faster and doesn't result in years on a repayment plan.

Chapter 7 bankruptcy can happen quickly. In fact, a discharge of debts can happen in as few as 60 to 90 days. Those who can't qualify for a Chapter 13 bankruptcy often qualify for Chapter 7, making it a better, and faster option.

Source: FindLaw, "Reasons to File for Chapter 7 Bankruptcy Instead of Chapter 13," accessed Feb. 25, 2016

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