It's safe to say that almost all consumers go for Chapter 7 over Chapter 13. That may be because Chapter 7 is the best-known form of bankruptcy. While Chapter 7 provides quicker and more complete debt elimination than Chapter 13, many filers appreciate the ease and flexibility Chapter 13 provides. To find out why many willingly and enthusiastically choose Chapter 13 over Chapter 7, read on.
Chapter 13 Is Better for Some
Several aspects of Chapter 13 make it more attractive than Chapter 7 for certain groups of filers. One stand-out feature is the lack of means-testing. Chapter 7 requires that filers have income levels at or below the state's median level. If they don't, they must undergo means-testing which is a form asking for greater details to determine whether or not certain deductions are available. Many of those who begin by trying to file Chapter 7 may end up filing Chapter 13 for this reason. Chapter 13 has no income requirements at all and no means testing either.
Another major issue that sets Chapter 13 apart from Chapter 7 is ethical concerns. Chapter 13 is a debt reorganization plan. Filers usually end up stretching out their current debt obligations over a longer period of time. Some creditors may drop penalties, reduce or eliminate interest, and even forgive a certain amount of debt if the filer follows the plan. To many filers, that means taking responsibility for the debts rather than discharging them entirely — the way Chapter 7 can do.
Keeping Things Flexible With Chapter 13
Unfortunately, those who cannot make the agreed-upon payments according to the Chapter 13 plan could end up defaulting on the bankruptcy. The best thing to do is to contact your bankruptcy lawyer when your financial situation changes. Chapter 13 agreements can be altered when problems pop up. Things can change when it comes to other debt obligations, jobs, income, health, and life circumstances. If so, be prepared to show why you want to make a change with your Chapter 13 plan.
You might want to do away with your Chapter 13 plan altogether in some cases. Ending your bankruptcy may be necessary if you can no longer handle the debt arrangements. Speak to your lawyer about how to ask for the case to be dismissed and then what to do next. For example, you might be able to file for another form of bankruptcy depending on the circumstances and the time elapsed since you filed Chapter 13. To find out more, speak to a bankruptcy lawyer.