St. Charles & St. Louis Residents: Should You File Chapter 7 or Chapter 13?
St. Charles & St. Louis Residents: Should You File Chapter 7 or Chapter 13?
Once you have made the decision to file for bankruptcy sometimes the hardest decision is whether you should file Chapter 7 or Chapter 13. The goal of this article is to make this decision easier for you. We will outline the pros and cons of both Chapter 7 and Chapter 13 to help you make a well-informed decision at your next meeting with your attorney.
Chapter 7 and Chapter 13 Non-Dischargeable Debts
A person considering either Chapter 7 or Chapter 13 bankruptcy should make a list of all their debts and take note of any debt that would fall under the categories of non-dischargeable debts. The following debts will not be discharged under Chapter 7 or Chapter 13. bankruptcy proceedings [see statute 11 523(a)]:
- Alimony obligations
- Back Child Support
- Debts dedicated to family support
- Debts for personal injury or death caused by driving while intoxicated
- Recent income tax debts, within 3 years, and all other tax debts
- Student loans, unless it would be an undue hardship for you to replay
- Fines and penalties for violating the law, including traffic tickets and criminal restitution
- Debts you forget to list in your bankruptcy papers unless the creditor learns of your bankruptcy case.
Chapter 7 Bankruptcy Advantages
The major advantage to filing Chapter 7 bankruptcy is that you will get a fresh start because it will wipe out all your debts. Other advantages of filing Chapter 7 bankruptcy are as follows:
- Your debt is usually completely discharged within 3-6 months
- You may keep unsecured debts such as your personal vehicle, furniture, and house by signing a “Reaffirmation Agreement” reaffirming these debts.
- No minimum amount of debt required
- Wages earned and property acquired, except inheritance, after bankruptcy filing date will not be owed to creditors or bankruptcy court
- Immediate protection against creditors collection efforts and wage garnishments
Chapter 7 Bankruptcy Disadvantages
- Can only be filed every eight years after the first case is filed
- Automated stay defense against foreclosure is only temporary
- Without bankruptcy protection, co-signers of a loan will be stuck with your debt
- You will lose non-exempt property
Chapter 7 Bankruptcy Non-Dischargeable Debts by Court Declaration
When filing Chapter 7 bankruptcy proceedings you should also be aware if your creditors challenge your request for discharge the bankruptcy judge may declare certain debts non-dischargeable. The following is a list of debts a creditor may request to challenge:
- Debts incurred on the basis of fraud, embezzlement, or willful or malicious injury to another person or another person’s property
- Credit purchases and loan or cash advances of $1,150 or more for luxury goods or services made within 60 days of filing
- Debts owed under a divorce decree or settlement unless after bankruptcy you would not be able to afford to pay them or if the benefit you’d receive from the discharge outweighs the detriment to your ex-spouse
Who Should File Chapter 7 Bankruptcy Proceeding?
A person who has a large amount of credit card debt, other unsecured debts, and very few assets should file Chapter 7.
Chapter 13 Bankruptcy Payment Plan Advantages
- You can keep all your property
- Debts reduced under Chapter 13 payment plan
- Immediate protection against creditors collection efforts and wage garnishments
- Debts incurred on basis of fraud and credit card charged for luxury items immediately prior to filing are dischargeable.
- If Chapter 13 plan provides for full payment, any co-signers are immune from the creditor’s
- Protection against foreclosure on your home, as long as you meet terms of the plan
- More time to pay debts that can’t be discharged
- Can be filed anytime and repeatedly
Chapter 13 Bankruptcy Disadvantages
- No flexibility in your cash flow over the Chapter 13 plan period
- Higher Legal Fees
- Debt and court process will last for three to five years
- Stockbrokers and commodity brokers cannot file Chapter 13 bankruptcy petition
Who Should File Chapter 13 Bankruptcy Proceedings?
Chapter 13 Bankruptcy tends to cost more money and take a longer period of time. However, if keeping more of our possessions is important to you, Chapter 13 is the best option.
What’s Next?
The question of whether you will file Chapter 7 or Chapter 13 Bankruptcy should not be taken lightly. Schedule a free consultation with an experienced bankruptcy attorney at the Law Offices of Kenneth P. Carp today at 636-947-3600.