4 Great Reasons to File a Chapter 7 in Lieu of a Chapter 13

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Deciding which type of bankruptcy to file is often a hard decision to make. Basically there are two types of bankruptcies an individual can file- a Chapter 7 or a Chapter 13.

A Chapter 7 is a type of bankruptcy where a bankruptcy court trustee will take your non-exempt assets and liquidate them to pay off your unsecured debt. Any unsecured debt not paid off with the funds from liquidation will be discharged at the end of the bankruptcy.

A Chapter 13 is a type of bankruptcy for people who are employed. They develop a plan to pay back all or part of their unsecured debt for 3 or 5 years with their disposable monthly income. Any unsecured debt not paid back during the time frame will be discharged at the end of the bankruptcy.


A Means Test is used to determine not only which type bankruptcy you can file, a Chapter 7 or a Chapter 13, it determines how many years your plan will be in a Chapter 13. If your family income is the median income or lower in the state you live, you can qualify for a Chapter 7. If your income is higher than the median income for the same size family, you must pass the Means Test in order to file under a Chapter 7.

Although you did not pass the Means Test, you can choose to file a Chapter 13 if you have a steady income. A reason you might want to file a Chapter 13 in lieu of filing a Chapter 7 when you qualify to file for one is when you have enough equity in a non-exempt homestead, and you want to keep your home.


There are reasons you might also want to file a Chapter 7 when you can file a Chapter 13. Here are 4 great reasons you might want to file a Chapter 7 in lieu of a Chapter 13 if you can qualify:

  1. Success rates of getting a discharge without distribution are by far much greater in a Chapter 7 than a Chapter 13. Some 60% of Chapter 13 cases are dismissed because clients fall behind on their payments.

  2. A Chapter 7 is cheaper to file. The national average to file for a Chapter 7 is around $1000 as compared to the national average of around $3000 for filing for Chapter 13.
  3. A Chapter 7 stays on credit records longer, but they often make filers better credit risks quicker because they do not carry ongoing payments.
  4. A Chapter 7 brings faster and greater relief. Only 5% of Chapter 7 cases involve asset liquidations because most filers have few assets that courts are interested in seizing.


Determining which type bankruptcy you may or may not want to file can be a very complicated legal process. Bankruptcy laws tend to be complex. Choosing the right type of bankruptcy will maximize the number of assets you can save.

Let us help you find a bankruptcy attorney in your area that can not only help you file the right type of bankruptcy, but can answer any questions you might have about bankruptcy law.

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