Chapter 13 benefits?

[leftyf]

Are there any benefits to filing 13 over 7? I know it falls off the credit report sooner, but I was telling my wife today that bankruptcy is bankruptcy. She disagrees...I could probably do the 13 at $80K per year and family of 5, and I may be forced into it. I would actually feel better about a 13, but I'm not sure why. I guess I would feel that I was making an effort to pay something back, since I can.
Of course if my job were to disappear, I would probably get to pay the lawyer again to file a 7.
New to this forum so I'm sure this question has been answered a bunch already...sorry for the repeat.
Thanks for any advice.
Leftyf

[Ineedhelp2]

I had no choice because of the equity in my home.

If I had filed chapter 7, I would have been forced to sell my home and use the proceeds to pay creditors, since in my state we could have kept only about $40k of our equity.

[SinkingFast]

What State, Leftyf??

$80K may sound like a lot. But for a family of 5, in the right State, you could be below the Median.

[$$only4ever]

I am currently in a chapter 13 for 60 months. (24 paid; 36 to go). I wish that I could have filed a chapter 7, but was flagged for substancial abuse by the US Trustee and had to go convert to a 13. If you are not at risk of losing your home and can fall within the criteria, filing chapter 7 is better. The nightmare and pain are over quicker. Good Luck.

[leftyf]

Chapter 13

I just sold my house...that is actually one of my concerns because I used credit card advance to help pay closing costs. I really did not want to be foreclosed on and go bankrupt...I think I was just afraid of paying even more attorney fees. I am in the state of Ohio.
It sounds like a lot of Chapter 13 filers would prefer a 7, so I guess there is no real benefit to the 13 except maybe it falls off of your credit report sooner?

I did not want to keep my house because I could not afford it with or without the major debt I have...I acquired most of the debt financing a lifestyle (including the nice house) that I could not afford. I was not technically a sub-prime homeowner, but pretty close. I am currently renting...the only assets I really care about are my two cars and neither one would be considered much of a luxury, I don't think.
Thanks,
Leftyf

[SinkingFast]

Gross income Median for a family of 5 in Ohio is $75190/year. At $80K, you'd be a bit over the Median. If you have Secured or Priority payments, you may eek into Ch 7. You'd need an attny to run a Means Test for you to know for sure.

There are benefits to a Ch 13.

As your wife pointed out, you will probably feel better, or at least she will, paying your Creditors something vs nothing. Once you're done with your payment plan, you're done with your Creditors. 60 months tops and it's all over. On your own, you could be dealing with debt for decades.

How much your Creditors are paid will be determined by your Disposable income. The Trustee will decide who will get what.

You'll be under the protection of the Automatic Stay for the duration of the Plan. No phone calls. No threats of law suits or judgements.

The Trustee can set or fix interest. Lates and penalties will stop accruing. If you're not in a Ch 13, your Creditors can continue to jack the interest, and pile on lates and penalties, increasing the amount you owe. Once you file, the amount is fixed.

Filing Ch 13 does have benefits vs going it on your own. You just have to decide if filing will work for you or not.

[CityGirl]

I am currently in a chapter 13 for 60 months. (24 paid; 36 to go). I wish that I could have filed a chapter 7, but was flagged for substancial abuse by the US Trustee and had to go convert to a 13. If you are not at risk of losing your home and can fall within the criteria, filing chapter 7 is better. The nightmare and pain are over quicker. Good Luck.

What do they mean by substantial abuse?

[HHM]

I am going to side with you on this one leftyf over your spouse, bankruptcy is bankruptcy. In so far as a person can't really choose which chapter of BK to file, it really doesn't matter.

I suppose the only benefit to a chapter 13 over a 7 is that you can use the chapter 13 payment history to your advantage and therefore, in the home buying context, you can probably get a "better" mortgage loan sooner than you could after a chapter 7. (but the loan would still not be a market loan).

The main drawback with chapter 13's is that only about 1/3 of those who file a chapter 13 actually complete the plan.

Chapter 7's are easier and tend to be more financially beneficial to the debtor than a chapter 13.

[CityGirl]

My friend filed a 7 and got an FHA loan 2 years after discharge at 6.0% interest. I was shocked!

[doglover]

flagged for substancial abuse by the US Trustee .

If you don't mind me asking... what does that mean? How did the trustee get to that conclusion?