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Chapter 7 vs. Chapter 13

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Chart: Comparing Chapter 7 and Chapter 13

How common situations are handled in Chapter 7 and Chapter 13 bankruptcy. Please bear in mind, bankruptcy cases and clients are like "snowflakes" there are no two EXACTLY alike.  In our firm we do not take the "cookie cutter" aapproach assuming all debtors are the same.  The rules below are guidelines please be prepared to disclose your specific circumstances to you Bankruptcy Lawyer for advise on which chapter is best suited for your unique situation. 

Comparing Chapter 13 and Chapter 7 Bankruptcy

What happens if...

Chapter 13

Chapter 7

You're behind on your mortgage or car loan.

You can repay the arrears over the course of three to five years through your plan, and keep the house or car, so long as you keep current on the existing monthly payments. If it's feasible to pay off the entire loan before the end of your plan, you may be able reduce the amount you have to pay.

It is important that you be up to date in the paymenst to a secured creditor before deciding to file a Ch. 7. If you are behind on a mortgage or car payment and want to keep the house or vehicle, you will fare better in a Ch 13.  Under Chapter 7 if you are behind, you'll probably have to either give the house or car back to the creditor or arrange to pay its wholesale value in full during your bankruptcy case

You owe back taxes to the IRS.

The result depends on your circumstances. It is not impossible to discharge tax debts but it has a whole set of rules to consider which will vary depending on the situation.  

The result depends on your circumstances.

You have valuable nonexempt property.

You keep all of your property.

You are allowed to keep the property which is exempt.  The exemptions willl vary from state to state and if you move around a lot the rules can be complicated. As for anything property and asset you own which exceed your allowed exemptions, you must give it up, pay the trustee its fair market value or, if the trustee agrees, swap exempt property of equal value for it.

You have codebtors on personal loans.

The creditor may not seek payment from your codebtor for the duration of your case.

The creditor will go after your codebtor for payment.

You received a bankruptcy discharge within the previous six years.

No problem; you can file anytime.

You can't file for Chapter 7 unless the recent bankruptcy was a Chapter 13 case, and you repaid at least 70% of your debts.

You want to keep secured property by paying the creditor its value.

You pay its replacement value (with interest) over time through your plan.

You pay the wholesale value in a lump sum.

Your disposable income is sufficient to fund a Chapter 13 plan.


The bankruptcy court might throw out your case or pressure you to convert it to Chapter 13.

You owe debts for:

  • back or prospective child support or alimony
  • student loans, unless repayment would cause you severe hardship
  • court-ordered restitution or criminal fines
  • taxes less than three years past due, or
  • debts for personal injuries arising from your intoxicated driving.

These debts must be paid in full in your Chapter 13 repayment plan or you will owe a balance at the end of your bankruptcy.

These debts cannot be erased in Chapter 7 bankruptcy.

You owe nonsupport debts under a property settlement, agreement, or divorce decree.

If you do not pay them in full during your Chapter 13 bankruptcy, the balance is wiped out at the end under Chapter 13 bankruptcy's "superdischarge."

If your ex-spouse or another creditor objects, these debts are not discharged unless you prove to the court that:

  • you will be unable to pay these debts after your bankruptcy case, or
  • the benefit you will get by discharging the debts will outweigh any detriment to your ex-spouse.

You have debts due to:

  • larceny (theft), breach of trust, or embezzlement
  • fraud, or
  • willful and malicious injury to another or another's property.

If you do not pay them in full during your Chapter 13 case, the balance is wiped out at the end under the superdischarge.

These debts are not dischargeable if the creditor objects and proves your bad act to the court.

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Garvey Tirelli & Cushner Ltd.
50 Main Street Suite 390
Wite Plains, NY 10606


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