Is Chapter 13 better than Chapter 7?

 Posted on October 13, 2021 in Chapter 13 Bankruptcy

The biggest difference between Chapter 7 and Chapter 13 bankruptcy is you repay debts in Chapter 13 through a payment plan. This fact may lead some people to believe that makes Chapter 13 a better option.

According to U.S. News and World Report, since both are still bankrupt, neither is better than the other in the eyes of creditors because they both show you had financial difficulties. However, for your situation, one may be better than the other in your eyes.

Chapter 7 may be better

Chapter 13 may also be more difficult when it comes to re-establishing your credit because you will not get your discharge until you complete the repayment plan. That could take three to five years. With Chapter 7, you will usually get your discharge within months of filing. So, you will not have an active bankruptcy as long as Chapter 7.

Chapter 7 also will wipe out your debts even if you cannot repay them. So, you begin again with a clean slate and do not have to pay anything more out of pocket. With Chapter 13, you only get rid of debt once you make some financial contribution out of pocket through your monthly payments.

Chapter 13 may be better

The biggest reason that will lead many people to feel Chapter 13 is a better choice is that it allows you to retain more property. In Chapter 7, the court will liquidate anything you cannot save through exemptions to repay your debts. With Chapter 13, you can hold onto more assets because you are repaying debts through your payment plan.

Deciding what works best for your situation is a personal decision. You may feel one is the better option over the other, and that is perfectly fine because you do want to do what is best for you.