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Factors to consider when deciding between Chapter 7 and Chapter 13 bankruptcy, P.2

In our last post, we began discussing some of the factors that need to be considered when deciding whether to file for Chapter 13 bankruptcy or Chapter 7 bankruptcy. Eligibility requirements dealing with a debtor's debt load and income have to be considered, for the simple reason that one will not be approved for either form of bankruptcy if one does not meet its specific requirements.

Aside from specific eligibility requirements, though, debt load and current income should also be considered from a practical perspective. If one does not have a reliable source of ongoing income, they will not be able to complete Chapter 13 bankruptcy. On the other hand, lack of regular, ongoing income is not a necessity for Chapter 7 bankruptcy. 

Another factor for the debtor to consider when deciding between Chapter 7 and Chapter 13 bankruptcy is whether one wants to keep property through the foreclosure process, particularly his or her primary residence. While it is not common to be able to save one's home in Chapter 7 bankruptcy--since it most cases the exemption does not cover the value of the debtor's home--it is more likely in Chapter 13 bankruptcy, depending on one's circumstances.  If keeping certain non-exempt assets is important to the debtor, he or she may want to file for Chapter 13 bankruptcy.                         

Another consideration in filing for bankruptcy is the extent to which one is willing to have a negative impact on one's credit. While both forms of bankruptcy will have a very weakening immediate effect on a debtor's credit strength, Chapter 13 only remains on one's credit report for 7 years, while Chapter 7 remains for 10 years. This can influence the decision about which form of bankruptcy to file for, at least for some debtors.

More to come on this topic in our next post.


United States Courts, "Chapter 7-Bankruptcy Basics," Accessed Feb. 22, 2016.

United States Courts, "Chapter 13-Bankruptcy Basics," Accessed Feb. 22, 2016. 

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