Although Chapter 7 is the more common form of bankruptcy, there are several reasons why people select Chapter 13 instead:
- You cannot file for Chapter 7 bankruptcy if you received a Chapter 7 or Chapter 13 discharge within the previous eight years.
However, you can usually file for a Chapter 13 despite having recently received a discharge.
- You have valuable nonexempt property.
- You’re behind on your mortgage or car loan. In Chapter 7, you’ll have to give up the property or pay for it in full during your bankruptcy case.
In Chapter 13, you can repay the arrears through your plan, and keep the property by making the payments required under the contract.
- You have debts that cannot be discharged in Chapter 7.
- You have co-debtors on personal (nonbusiness) loans. In Chapter 7, the creditors will go after your co-debtors for payment.
In Chapter 13, the creditors may not seek payment from your co-debtors for the duration of your case.
- You feel a moral obligation to repay at least a portion of your debts, you want to learn money management or you hope new
creditors might be more inclined to grant you credit after a Chapter 13 than they would after a Chapter 7.
- You make too much money to qualify for a Chapter 7, but not enough money to pay your credit cards or other bills.