How do I love Chapter 13? Let me count

27 Aug How do I love Chapter 13? Let me count

I often recommend Chapter 13 to clients who qualify for Chapter 7. Why? One well known bankruptcy lawyer has a 53 item list of reasons to file Chapter 13. My favorite reason is because it’s flexible.

A Chapter 13 plan can be dismissed at the debtor’s request at any time, for any reason, or for no reason. That might be a very important option if the debtor’s circumstances changed after filing bankruptcy.

Suppose the debtor received a large inheritance or incurred a large unanticipated debt like a hospital bill or caused an auto accident. The trustee in a Chapter 7 case will not support dismissal if it cuts the creditors out of the inheritance; the court has no reason to allow the debtor to include a post filing debt in the case that reduces the dividend to the other creditors. The debtor in a Chapter 7 is out of luck.

In Chapter 13, the debtor has the option to dismiss the case. The dismissed case does not count as a bankruptcy for purposes of when the debtor is eligible to file another case. It may impact the duration of the automatic stay in the new case, however.

That flexibility to deal with the unknown or new developments leaves the debtor the maximum number of options to deal with their debts.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

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