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Why would Chapter 7 bankruptcy be better than 13?

Chapter 13 and 7 bankruptcies are different in a few ways. For instance, Chapter 7 bankruptcy is known as liquidation bankruptcy, because you must liquidate many of your assets during the process. Chapter 13 works differently, because you make a payment plan with your creditors. That allows you to keep your assets while paying down debt and discharging debts as agreed at the end of the bankruptcy.

There are some reasons you may choose to file for Chapter 7 bankruptcy instead of Chapter 13. For instance, if you have a low income, this may be a better choice for you, since there is an income limitation.

With Chapter 7 bankruptcy, there is no limitation on the amount of debt you can have. With Chapter 13, there is. You also won't have to deal with a repayment plan, because the debt will be discharged following the agreements made during the bankruptcy.

With Chapter 7 bankruptcy, debts discharge very quickly. It takes between 60 and 90 days for the bankruptcy to take hold. After that, the court issues a discharge order and allows the trustee to distribute property to unsecured creditors as needed. Once this is finalized, the court can close the bankruptcy, and you can move forward without debt.

You can keep your future income with a Chapter 7 bankruptcy, although there are some exceptions, like if you acquire a large amount of money during the 180 days following the bankruptcy. Otherwise, your income remains yours, allowing you to start over without having to fall into debt again. Bankruptcy is designed to help you eliminate debt, so allowing you to keep your income should help you avoid it in the immediate future.

Source: FindLaw, "Reasons to File for Chapter 7 Bankruptcy Instead of Chapter 13," accessed April 27, 2016

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