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Choosing Between Ch. 7 and Ch. 13

Choosing Between Chapter 7 and Chapter 13

There are four main considerations t to take into account when deciding between Chapter 7 and Chapter 13 bankruptcy.

The first thing to know is whether you are even eligible for a Chapter 7 discharge. If you have filed and received a Chapter 7 discharge within the previous eight years, you are currently ineligible to receive a Chapter 7 discharge, so this would be a reason why you would file a 13 as opposed to a Chapter 7.

The next thing to consider is whether you going to qualify for a Chapter 7 discharge on the basis of the means test (assuming you have to take the means test and are not a non-consumer debtor), which will evaluate whether you make too much income for Chapter 7 bankruptcy. While this test only creates a presumption about whether you will get a Chapter 7 discharge, if you don’t qualify under the means test presently, you probably do not want to file a Chapter 7 and request a special exception.

Since one of the primary things you want to do when filing bankruptcy is to keep all the assets you want to keep, and since chapter 7 is a liquidation chapter, in Chapter 7 you only get to keep as much stuff as your exemptions. Therefore, you need to evaluate the equity you have in your items versus the exemptions that you are allowed under either your state or federal exemptions to determine whether you will keep everything you want to keep. If theoretically you might lose something in Chapter 7, you might therefore file Chapter 13 to keep it, even though you really want to do a Chapter 7.


The final factor to consider when choosing between Chapter 7 and Chapter 13 is whether you need a repayment plan to keep a particular item. For instance, let’s say you’re behind on your house or your car payment and you want to keep those items. Chapter 7 is not designed for you to pay arrears on secured items. Therefore, if you need a repayment plan for the arrears, then Chapter 13 is probably the more appropriate chapter for you.

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