Ask the Attorney: Why a Chapter 7 Bankruptcy is Better

There are several reasons why Chapter 7 bankruptcy can be much better to most people than Chapter 13 bankruptcy.

Chapter 7 is usually quicker than Chapter 13, many people can keep all or most of their property, and they don't have to pay back a portion of their debts, like in Chapter 13. Of course, not everyone qualifies for Chapter 7 bankruptcy.

A typical Chapter 7 bankruptcy case is opened and closed within three to six months, and the person filing emerges debt-free except for mortgages, car payments, and certain types of debts that survive bankruptcy, such as student loans, recent taxes and unpaid child support.

Although you can lose property in Chapter 7 bankruptcy, the overwhelming majority of people who file don't. Bankruptcy lets you keep most of your personal property, and unless you basically have gold bricks stashed in your basement, chances are good you'll be able to keep all or most of your property (unless you pledged the item as collateral for a loan).

However, not everyone is eligible to use Chapter 7 bankruptcy. If your income is sufficient to fund a Chapter 13 repayment plan after subtracting what you'll spend on certain allowed expenses and monthly payments for child support, tax debts, secured debts—such as a mortgage or car loan—and a few other types of debts, you won't be allowed to file for Chapter 7 bankruptcy.

You may also not be eligible for Chapter 7 bankruptcy if you are seriously delinquent on your mortgage.

Probably the main reason most people prefer Chapter 7 bankruptcy is that it doesn't require you to repay any portion of your unsecured debts, as Chapter 13 bankruptcy does.

And if you use Chapter 13 bankruptcy, you must complete the entire three-to five-year repayment plan in order to have your remaining debts discharged (unless the court lets you off the hook early, for hardship reasons). The majority of those who file for Chapter 13 bankruptcy don't complete their plans, so filers run a very real risk that their debts won't ultimately be discharged.

The simple answer is that if you are eligible to file Chapter 7 bankruptcy, there is little to no reason to even look at a Chapter 13 bankruptcy. Chapter 7 is clearly the better option.

The best way to determine whether you can file for bankruptcy is to contact an attorney—he should be able to give you a good idea of your eligibility within just a few minutes, and you’ll never know if you don’t ask.

This article is intended as a discussion of legal topics that are often confusing to many laypeople; it is not, and should not be relied on, as legal advice. Attorney Jesse White is licensed to practice solely in Pennsylvania and any information discussed relates solely to Pennsylvania law. The hiring of a lawyer is an important decision that should only be made after careful consideration. If you feel you need to hire an attorney, contact The Law Office of Jesse White in at 724-743-4444 or visit www.jessewhitelaw.com for free written information about areas of practice and experience.