• Christine Thurston

Which Bankruptcy is Better for You, a Chapter 7 or Chapter 13?

Unfortunately this question is almost impossible to answer, because it really depends on your unique situation. But, in very basic general terms, it depends on what type of debt you have.


A Chapter 7 bankruptcy will get rid of unsecured debt. Meaning credit cards, medical bills, car repossessions, City of Chicago parking tickets OVER 3 years old, older IRS and state income tax debt (if the taxes were filed over 2 years ago), and personal loans. This is not an exhaustive list. If there's collateral, it will not get rid of the debt without surrendering that collateral. A Chapter 7 usually lasts around four months.


A Chapter 13 bankruptcy is a repayment plan over 3 to 5 years. You can include what you are behind on your mortgage to get out of foreclosure. You can include your car payment if you are behind and at risk for repossession. You can also include newer income tax debt and parking tickets and camera violations.


Some people must do a Chapter 13:


1. If you are over the income (means) test and have too much disposable income.

2. If you have assets above the Chapter 7 exemptions amounts and are at risk of having those assets liquidated through a Chapter 7. You are allowed to keep a certain amount of property. However, if you have too much equity for Chapter 7 purposes, the bankruptcy trustee can take that property and sell it to pay off your debts. A Chapter 13 lets you keep all your property.

3. You have filed a prior Chapter 7 bankruptcy within the last 8 years.


However, many people qualify for both a Chapter 7 and Chapter 13 bankruptcy. In order to know which bankruptcy is the best option for you, please contact our office for a free consultation.

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