When is Chapter 13 Bankruptcy Preferable to Chapter 7?

When filing for bankruptcy in Arizona, there are several situations in which a Chapter 13 bankruptcy filing is preferable to a Chapter 7. A Chapter 13 bankruptcy is usually the best choice for those who are behind on a mortgage or business payment and want to keep the property at the end of the bankruptcy process. Chapter 13 bankruptcy also allows debtors to make up overdue payments over time. In general, if you have valuable property that is not covered by your Arizona bankruptcy exemptions that you still want to keep post-bankruptcy, a Chapter 13 filing may be the best option. In some cases, those who wish to file Chapter 7 may not be able to because their income is too high. In cases like this, the debtor will have to choose Chapter 13 bankruptcy. However, if you simply want to eliminate a heavy debt burden without repaying any of it, Chapter 7 could provide the most attractive option. There are several advantages to filing Chapter 7, including:

• Receiving a completely fresh start by discharging debts
• Receiving immediate protection against creditor’s collection efforts and wage garnishment
• Keeping wages earned and property acquired after the bankruptcy filing date
• Having debts completely discharged in about three to six months

However, there are many advantages to a Chapter 13 payment plan as well, including:

• Having a payment plan that allows you to keep all your property, both exempt and non-exempt
• Receiving a reduction in debt repayment under a Chapter 13 payment plan
• Receiving immediate protection against creditor’s collection efforts and wage garnishment
• Co-signers are immune from creditors’ efforts
• Receiving protection against foreclosure on your home
• Have more time to pay debts that cannot be discharged by either chapter, such as taxes or back child support

Choosing the Right Type of Bankruptcy for You

The type of bankruptcy you choose will depend on your unique situation. To ensure you make the best decision for yourself, speak with a bankruptcy attorney like those at the Oswalt Law Group in Phoenix, Arizona. Our team of skilled bankruptcy attorneys will review your situation and help you determine if bankruptcy is the right option. If it is, we can also help you determine which chapter will work best for your situation. If bankruptcy is not the best option for you, we can help you determine other options that may help relieve debt.