When You Might File for Chapter 13 Reorganization

The Reasons for Choosing Chapter 13 Over Chapter 7

If you’re struggling to make ends meet and have concluded that your best way forward is through the filing of a personal bankruptcy petition, a Chapter 7 may seem like the best choice. After all, with a Chapter 7 petition, you can permanently rid yourself of any obligation to repay a debt. There are, however, situations where you may be forced to choose a Chapter 13 reorganization, or where Chapter 13 will be a better option to get the outcome you want.

When You Don’t Qualify to File under Chapter 7

Prior to 2005, a debtor filing for bankruptcy protection could choose between a Chapter 7 and a Chapter 13—most opted for liquidation of debts through Chapter 7. Pursuant to the revisions enacted by Congress nearly 20 years ago, you must now take a “means test,” whereby the court looks at your resources and determines whether you have the ability to repay your creditors over a three-to-five-year period. If you do, your only option in bankruptcy is through a Chapter 13 filing.

Other Reasons You May Choose to File for Protection under Chapter 13

There are two other compelling reasons to opt for reorganization under Chapter 13:

• Most of your debts are non-dischargeable in Chapter 7—Child support payments and some other family law obligations may not be wiped out in a Chapter 7 petition. Furthermore, most tax obligations and student loan arrearages are extremely difficult to discharge. If these make up the bulk of your debts, you will likely be better off filing under Chapter 13.
• You want to keep all or most of your property—As a general rule, to discharge debts in Chapter 7, you must relinquish property to the bankruptcy trustee, to be sold to satisfy your creditors. That’s not as much of a consideration in Texas, however, because state law allows generous exemptions of property from the bankruptcy estate.

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation.Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

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