Chapter 7 provides the greatest possible relief from dischargeable unsecured claims (credit cards, mortgage deficiencies, medical bills, etc.). The debtor keeps exempt property and the case is closed after about four or five months. This makes a Chapter 7 Bankruptcy a very desirable remedy.
Sometimes, though, a Chapter 13 Bankruptcy is an alternative that can’t be avoided. In Chapter 13, the debtor files a plan with the court to make a series of payments, either 36 months or 60 months, to pay the unsecured debt. Here are some reasons to file Chapter 13:
• A debtor makes too much money and, therefore, cannot qualify for Chapter 7.
• A debtor is behind on their home mortgage, so they need to use Chapter 13 to catch up the arrears over a 60 month period.
• A debtor has too much equity in their assets and would lose them in a Chapter 7 case, so they file a Chapter 13 case and in effect, buy back the assets’ equity from their creditors.
