Should I File a Chapter 7 or a Chapter 13?
By Brett Weiss, Maryland Bankruptcy Attorney on Sep 28, 2009 in General Bankruptcy Information
Many of my clients come into my office already knowing what chapter of the Bankruptcy Code they want to file under. Others have no idea how they want to proceed. So which chapter is “best”?
The answer, of course, depends on the details of the case.
My general rule of thumb is that, unless there is a strong reason to file for Chapter 13, I recommend a Chapter 7. Why is this?
1. Chapter 7 is less expensive. The attorney’s fees are usually less, often significantly less.
2. It is a much shorter process. Filing to discharge typically is about four months, versus up to five years in a Chapter 13.
3. There is one hearing, the meeting of creditors. In a Chapter 13, you also have confirmation hearings.
4. Unless you have assets that can be distributed to creditors, there is very little Trustee involvement. In a Chapter 13, the Trustee is far more involved in your case.
So why would you want to file a Chapter 13?
1. You can catch up on mortgage and car arrearages, back child support and alimony, and taxes over five years in a Chapter 13. You have no protections in a Chapter 7.
2. Co-debtors are usually protected from collections while you are in the Chapter 13.
3. You may be able to strip off an unsecured second (or third) mortgage, judgment or lien in a Chapter 13.
4. You may be able to cram down your car or other asset in a Chapter 13.
5. If you fail the Means Test, you may have no alternative but a Chapter 13.
6. If you have non-exempt assets, a Chapter 13 may be the only way you can keep them.
The determination of which chapter to file is not always an easy one. Speak with your attorney to discuss the right way to go.
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