Should I File a Chapter 7 or a Chapter 13?

28 Sep Should I File a Chapter 7 or a Chapter 13?

Some 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, which is not in front of a judge and may not even be in the courthouse. In a Chapter 13, you also have confirmation hearings before a judge in court.

4. Unless you have assets that can be distributed to creditors, there usually 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 ability to catch up payments 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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Brett Weiss, a senior partner at The Weiss Law Group, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his colleague, Daniel Press, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the previous Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute and the Bankruptcy Bar Association of Maryland. He has received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, the United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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