Why Choose Chapter 13 Bankruptcy Over Chapter 7?

TL;DR

Chapter 13 bankruptcy is preferred over Chapter 7 mainly for two reasons: individuals either do not qualify for Chapter 7 based on the means test or they wish to retain non-exempt assets that might be at risk in Chapter 7. While Chapter 7 resolves debts quickly, Chapter 13 allows asset retention but requires monthly payments over five years.

Transcript

hey everybody john skiba here from the consumer warrior youtube channel i am a bankruptcy attorney in the state of arizona and in this video i'm going to tell you the two main reasons that people choose to file chapter 13 bankruptcy over the more traditional chapter 7 bankruptcy but if this is your first time here to my youtube channel please go ah... Read More

Key Insights

• ❓ Chapter 7 bankruptcy is the more popular choice because it is quicker and eliminates debts without requiring payment.
• 🏆 Chapter 13 bankruptcy is chosen when individuals do not qualify for Chapter 7 due to income exceeding the means test threshold.
• 📼 Assets that are not protected by exemptions or have excessive value are at risk of being sold in Chapter 7 but can be retained in Chapter 13.
• ❓ Chapter 13 bankruptcy involves a five-year commitment and requires payment of a portion of unsecured debts.
• ❓ The decision between Chapter 7 and Chapter 13 should be made with the guidance of a bankruptcy attorney.
• 👋 Bankruptcy may not always be the best solution, and an attorney can evaluate if it is a suitable option.
• 👻 Chapter 13 bankruptcy allows individuals to retain assets like boats and homes but requires making monthly payments to creditors.

Questions & Answers

Q: What is the means test, and why is it important for Chapter 7 bankruptcy qualification?

The means test compares an individual's household income to the typical income of a similar-sized household in their state. If the person earns more, they may not qualify for Chapter 7.

Q: What assets are at risk of being sold in a Chapter 7 bankruptcy?

Non-exempt assets or assets with excessive value, such as a boat or a home with significant equity, may be subject to sale in Chapter 7 bankruptcy.

Q: How does Chapter 13 bankruptcy protect assets like a boat or home with equity?

Chapter 13 bankruptcy allows individuals to keep non-exempt assets by making monthly payments to creditors over a five-year period.

Q: Are Chapter 13 payment amounts fixed, or do they vary case by case?

Chapter 13 payment amounts depend on several factors, including income, assets, and whether non-exempt assets are present. It is a case-by-case analysis.

Summary & Key Takeaways

• Most people choose Chapter 7 bankruptcy because it is shorter and eliminates debts like credit cards and medical bills.

• Chapter 13 bankruptcy lasts longer (up to five years) and requires payment of a portion of unsecured debts.

• The two main reasons individuals choose Chapter 13 over Chapter 7 are income disqualifications and concerns about losing assets.