Choosing Between Chapter 7 and Chapter 13 Bankruptcy – Insights from James H. Wilson

At our firm, we understand that deciding to file for bankruptcy is not an easy choice. Many individuals grapple with which type of bankruptcy is most appropriate for their situation. Chapter 7 Bankruptcy often presents a preferable option for those eligible due to its swift and straightforward process.

The Benefits of Opting for Chapter 7 Bankruptcy

Our team at James H. Wilson has observed that a standard Chapter 7 filing is typically resolved within a mere three to six months. Clients find relief as they come out of this process virtually debt-free, with the notable exceptions of mortgages, vehicle loans, and certain non-dischargeable debts like student loans, recent tax debts, and child support obligations.

Most individuals fear the loss of their property when considering Chapter 7, but it’s crucial to note that the exemption laws allow a majority of filers to retain essential possessions. Only items used as collateral may be at risk. However, eligibility for Chapter 7 is not universal. It’s tailored for individuals whose income, after deducting specified expenses and obligatory payments, cannot sufficiently cover a Chapter 13 repayment plan.

Why Some May Hesitate With Chapter 13 Bankruptcy

Our clients generally express a preference for Chapter 7, primarily because it doesn’t necessitate repayment of debts, contrary to the Chapter 13 structure. Repayment plans under Chapter 13 extend over a period of three to five years, after which any remaining debts may be discharged, subject to the court’s approval. Notably, a high percentage of people who start a Chapter 13 plan are unable to see it through to completion.

Transferring from Chapter 13 to Chapter 7 can be viable for eligible individuals; however, any previously made payments towards dischargeable debts may not count in their favor. Conversely, addressing debts outside of the bankruptcy framework could leverage the amounts already paid in a Chapter 13 plan.

Despite its complexities and commitment, Chapter 13 remains the right choice for specific cases. When individuals are capable of fulfilling a repayment plan and wish to avoid the liquidation of assets, Chapter 13 can offer an alternative pathway to financial recovery.

At James H. Wilson, we guide our clients through the nuances of both bankruptcy chapters to ascertain the ideal approach for their financial circumstances. If you are contemplating bankruptcy, connect with us at 804.740.6464 to explore your options with clarity and confidence.