Chp 13 vs Chp 7

[Reddrocket07]

I heard that the new laws passed for bankruptcy were designed to force more people to file Chapter 13 as opposed to Chapter 7. What is everyones opinon on this?

Also, most of us here have looked into both. Which do you think is better and why?

[liz417]

We've decided to do a ch 13 because we want to keep our house and cars. Going to the initial consultation we knew that we were above the means and thought we wouldn't qualify for a ch 7. I wished I had found this site BEFORE we decided on ch 13. I have to admit that I'm a little *jealous* when I read about the people who file, have their 341 and are in the "60 day count down club" and then *poof* discharged!! Here I am planning my ch 13 for the long haul of 5 years I still haven't filed yet....

This site and everyone on has really be a lifesaver for me!!! Thanks All!!!

~Liz

[Reddrocket07]

Yes finding this website has made me feel extremely better about needing to file bankruptcy. Its nice to know that we arent going through this alone!

[justplaintired]

Alot depends on whether you pass the means test or not. It's your choice to a point, but if you want a 7 but your disposable income is to high you will go to a 13. Also being current on a mortgage and if you intend to keep your home. Some who are behind on their mortgage or car payment and want to keep those things, who qualify for a 7, will go 13 in order to keep those things. Some depends on whether you have assets you want to protect, then you would go 13. There is alot of reasons someone goes with a 13, same with a 7.

We are C7, we qualify by our income and by disposable income, we have none. So it's a simple choice. We have remained current on the house, and we do want to keep it. We have no big assets and the things we have are protected by our state's exemptions. Our equity in our home falls below our states equity allowance, so the choice was not hard for us.

Really the best way to start is to take the means test if you haven't yet. This is a pretty good one to use before you see an attorney it will give you a fair estimate on which Chapter you can qualify for.

http://www.legalconsumer.com/bankruptcy/means-test/index.php

Good luck with whatever chapter you decide or qualify for.

[oopsnow]

my reasons

I want to go C7 but to file without including my husband. All of the attorneys I have talked to over the phone, or in their office (their assistant actually) have said, point blank, I can only file a 13. At this time I make good money but my OT hours are being cut at my present assignment, and when it is over I know my earnings will be cut 50% when I go back to GA.
Maybe the reduction is income will be to my advantage for a C7.
Our mortgage payments are up to date; my bills are all up to date, but, with the change in pay I know I won't be able to meet them. My car has about 2 years of $400. month payments and my husbands car is paid off. We have no other secured debts. I do have a loan against my TSA with a balance of about $12,000. No student loans, no tax problems, etc. This year we got a refund of $8,000. (which we put on CC's) but the year before we paid in $4,000.
I'm trying to get all my ducks in a row for either the 7 or 13 for when I do sit down with an attorney and get the show on the road. I'm scared of either one, but I know this is something I need to do.

[Flamingo]

One of the main purposes of the new BK law that took effect in 10/05 was to eliminate what was stated to be "rampant" fraud taking place in BK filings prior to that time and to force more people who were able to pay for their debt to pay via Chapter 13. All this required a ton of extra paperwork and legwork for attorneys who, therefore, raised their fees to handle BKs with many even getting out of doing BK's. We filed under the old law and our main purpose for filing a Chapter 13 was to keep our house and the Chapter 13 allowed us to do that and forced us to learn to budget and learn to how to control money instead of money controlling us. It's an eye opener that those filing Chapter 7 will not experience and I feel that experience is priceless and should be experienced by all who file BK because there are many who go right from a Chapter 7 discharge back to a heavy debt load in a few years by racking up more credit since they are debt free and before they know it are on the road to filing again in several years. The new law has also increased the time between when one can file Chapter 7 and then file another one. Believe it or not, there are folks out there who actually have used BK as a budgeting tool, filing BK after BK, because they cannot learn how to handle money or are addicted to spending or gambling.

So to answer your question which BK is better, 7 or 13, neither is because everyone's financial situation is different. What is best is what works at that time to try to alleviate the debtors of their burden and to give them a fresh start and hopefully learn from the experience to change their lives so it does not occur again.

[keepmine]

As has been mentioned here a few times, at the end of the day you have to file the bk that you qualify for. Having said that, I believe you should strive for a Chapter 7 if at all possible. Within 90-120 days, it's all over. No 60 month repayment plans that suck up all dispsoable income.

[AngelinaCat]

We were planning to file 13. We thought with 'Hub's SS income, the tiny little retirement income, what he could make doing computer consulting, and my FT and PT jobs we would have enough disposable income to manage a 13. We also get a stipend from a trust once a year, but that goes to pay the property taxes and some of our insurances. When we took the pre-filing credit counseling, the counselor ran our numbers and said that we really were more suited to a 7, because there just wasn't enough disposable income to fund one. Then, when I lost my FT job, that sealed it. We had to file a 7.

Now, it happens that we had too many non-exempt items that we are having to buy back from the estate if we want to keep them. None of them are big ticket items and if sold would only bring in pennies, if that. But collectively......

So you could say that we are in a 'razeed' (cut-down) 13 in that we are making monthly payments to the trustee that should end with April's payment. We also have a preferrential insider payment we have to make in February which will come out of the trust stipend. So we are learning budgeting. I am also on the hunt for another job, but so far nothing. The FT position that I was hoping and praying for went to somone younger.....

[oldrocker]

As has been mentioned here a few times, at the end of the day you have to file the bk that you qualify for. Having said that, I believe you should strive for a Chapter 7 if at all possible. Within 90-120 days, it's all over. No 60 month repayment plans that suck up all dispsoable income.

Well, it's not always that cut and dry. We qualified for a 7 but went with a 13.

To do the 7 I would have had to renegotiate my fed income tax payment plan, they are not as much fun to deal with the second straight year of not being able to pay your income taxes. Also would have had to set up another payment plan for my state taxes. We also would have had to come up with $1500 upfront for the lawyer. There would also have been many more hoops to jump through concerning my business and a past business I used to be involved in.

Instead we decided on the 13. $600 upfront to the lawyer and didn't have to deal with the IRS or state tax people. Business got only a cursurary glance by the trustee. Lawyer put together a plan that only pays taxes, lawyer fee and trustee percentage unsecureds are getting 0. Trustee has filed a motion to accept our plan and we're just waiting for confirmation hearing (and possible creditors objections) now.

The 13 was the cheapest up front and seemed like the path of least resistance. Since the tax debt would've had to be paid anyway we didn't mind going with the 13 (since that's all it's paying). Plus it clears off our credit reports 3 years sooner than the 7.

[Cali]

When went to meet with attorneys we knew we wanted to file C7. We were over median by 23k and our debt was 162k. We didn't have anyone say we couldn't file C7, but we should be ready to get a lot of grief because of the high debt and being over median. We were prepared for whatever came our way.

We filed in June, had 341 in July and now am waiting for 60days to be up(24 to go) and hopefully we will get our discharge in a timely manner.

[oopsnow]

How did you do it?

Cali; could you let us in how your attorney managed a 7, being over the means by that much? I want to go 7, and we will not be over that much. Whats the scoop?

[becky20]

We were over the median income by I think 20K, but on doing the means test, turns out we qualified for a 7. But, we were behind on our mortgage payments and wanted to keep the house. But for us, we were able to cram our two car loans.

Before BK, car payments were 470 and 298. (total 768). Our unsecureds are getting 0% and the plan is paying our two crammed car loans, trustee payment, mortgage arrears and hoa arrear fees and our payment is $552. So for us, we get to keep our home and have 200 extra per month...

[Cali]

Our total deductions allowed was more than our monthly income, which made our monthly disposable income negative.

Cali; could you let us in how your attorney managed a 7, being over the means by that much? I want to go 7, and we will not be over that much. Whats the scoop?

[Lajazz947]

Cali; could you let us in how your attorney managed a 7, being over the means by that much? I want to go 7, and we will not be over that much. Whats the scoop?

I was told by my attorney that even though we were WAY over the median income when I factored in my State, Fed and self employment taxes, my expenses, my mortgage and my allowable expenses I failed the means test.

I still expect to get grief due to the income as well as the unsecured debt ( $200,000 ) but I am just saying that there is a possibility for me.