When Chapter 13 May Be a Better Option Than Chapter 7

Why Reorganization Can Be Preferable to Liquidation

When you’re struggling to meet your financial obligations, the thought of having your debts permanently discharged can be appealing. That’s what a Chapter 7 bankruptcy offers—the elimination of certain debts in exchange for the transfer of some of your assets to the bankruptcy court, to be used to satisfy your creditors. So why wouldn’t everyone filing for bankruptcy choose Chapter 7?

The simple answer is that they can’t. Under the bankruptcy laws, an individual must qualify for Chapter 7 by submitting to a “means” test. The means test looks at a debtor’s resources, including income, and determines whether the debtor can repay creditors over a three-to-five-year period. If so, the debtor must file under Chapter 13.

Other Reasons for Choosing Chapter 13 over Chapter 7

Even if you qualify for Chapter 7, you might still choose to seek protection under Chapter 13 for a number of reasons:

• You want to keep your home or car—With some exceptions, you cannot discharge the debt on collateralized property and keep the property. Chapter 7 won’t let you catch up on back payments and keep the property. Only Chapter 13 allows that.
• The debts you have are not dischargeable—Certain debts, such as child support, cannot be discharged in bankruptcy. Others, including student loan payments and tax arrearages, are extremely difficult to discharge. However, under Chapter 13, you can set up a payment plan to pay off these debts over a three-to-five-year period.
• You want to protect a debt cosigner from liability—When you discharge your obligations through Chapter 7, it doesn’t have any effect on a cosigner’s liability. They can still be held responsible for the entire debt.

Contact an Experienced Rockwall, Texas, Bankruptcy Attorney

At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. I am currently communicating with clients by phone, text message, and videoconference. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.