Is it Better to File Bankruptcy Chapter 7 or Chapter 13?

It is essential to keep in mind that different types of bankruptcy are suited for different filers, depending on their resources, obligations, and short- and long-term goals. Seeking legal advice early on is advisable as you look closely into your financial problems and work toward making a decision that will rebuild your financial future.

A successful bankruptcy filing under Chapter 7 can wipe out different types of debt. That means that a debtor will no longer need to repay debts they owe from creditors. Alternatively, a Chapter 13 bankruptcy declaration can help you pay back what you owe to lenders while keeping your assets. If you plan to file for bankruptcy, seek legal aid right away.

Short Summary:

  • The choice between Chapter 7 and Chapter 13 bankruptcy depends on individual circumstances, resources, and financial goals. 
  • Chapter 7, known as liquidation bankruptcy, provides immediate debt elimination, freeing you from the obligation to repay certain debts. 
  • Chapter 13 is beneficial for catching up on late payments and restructuring debts, although it may be costlier and involve monthly payments.
  • Eligibility for Chapter 7 or Chapter 13 is determined by factors such as income, properties, and debt amounts. Understanding specific requirements, waiting periods between filings, and utilizing online tools like the Quick Median Income Test are crucial steps before choosing a bankruptcy type.
  • Chapter 7 is generally recommended unless specific circumstances favor Chapter 13, such as challenging non-dischargeable debts, significant asset equity, or the inability to file Chapter 7 again within eight years.
  • Chapter 13 may be suitable for retaining assets, catching up on overdue secured debt payments, or addressing specific financial challenges that Chapter 7 cannot adequately resolve.

Is There Any Difference Between Bankruptcy Chapter 7 vs 13? 

Bankruptcy allows for either complete debt elimination or an extended repayment period. Individuals facing insolvency choose bankruptcy since they cannot settle their bills from debts exceeding their income. Chapters 7 and 13 bankruptcies help provide financial freedom and immediate relief. 

In achieving this, Chapter 7 (also known as liquidation bankruptcy) helps those who cannot afford to repay their debts (like credit card debts, medical debts, and personal debts) by eliminating some of them. Chapter 13 aids higher-income individuals with valuable assets in reorganizing their debts. 

Choosing Between Bankruptcy Chapter 7 vs 13 in Oregon

Choosing between these two types of bankruptcy is not up to you. Whether you want to file for Chapter 7 or Chapter 13 will always be based on your qualifications. Those correspond to your income, properties, and the amount of debt you have.

When Choosing Chapter 13 in OR

Chapter 13 is about repaying what you owe to creditors over three to five years. It lets you keep everything you own. You can also use it to catch up on late payments, like saving your home from foreclosure or keeping your car. If you have a debt you cannot eliminate, Chapter 13 allows you to force a payment plan on the creditor. 

But it can be expensive, and some may find it challenging to make monthly payments. Businesses cannot also use Chapter 13. Business owners should explore small business bankruptcies instead.

When Choosing Chapter 7 in OR

Choosing Chapter 7 bankruptcy in Oregon is popular for its speed and affordability. It is a quick process, usually completed in three to four months. You also do not have to pay anything to creditors. This option is good if you own essential items for daily life but not much more. But if you have extra assets, the Chapter 7 trustee may sell non-essential items to pay creditors. 

Unlike Chapter 13, there is no payment plan to catch up on overdue mortgage or car payments. So you risk losing your home or car if you are behind on payments when you file.

What Do I Need to Qualify for Chapter 7 or Chapter 13 Bankruptcy in Oregon?

You must meet specific requirements to qualify for Chapter 7 or Chapter 13 bankruptcy in Oregon. If you have filed before, check if enough time has passed before filing again. There is a waiting period between filings. 

Qualifications for Chapter 7 in Oregon 

To qualify for Chapter 7 bankruptcy, your family’s income must be lower than the median for a similar-sized family in your state. Just add up your family’s gross income from the last six months, double it, and compare the result with income charts on the U.S. Trustee’s website. 

You can use the Quick Median Income Test online for an easy check. If you still earn too much, you might qualify after the second part of the “means test.” If your remaining money after deducting expenses isn’t enough for a Chapter 13 plan, you’ll likely qualify for Chapter 7.

Qualifications for Chapter in Oregon

Qualifying for Chapter 13 involves considering priority nondischargeable debt, nonexempt property value, or disposable income. The most challenging part is often the monthly payment. 

Understanding these requirements is crucial before choosing between these two types of bankruptcy.

How do I Apply for Chapter 7 Bankruptcy in Oregon?

When filing for Chapter 7 bankruptcy in Oregon, first, take the means test. Then, gather these documents: 

  • a list of who you owe money to and how much, 
  • a list of your belongings and their values, 
  • your most recent tax return, and 
  • your pay stubs or income proof.

How do I apply for Chapter 13 Bankruptcy in Oregon? 

For Chapter 13 bankruptcy in Oregon, start by submitting a request to the bankruptcy court. Provide details about your creditors, income, expenses, and belongings. Also, propose a plan for repaying debts. After filing, there’s a meeting where creditors can raise concerns. If there are no issues or if they’re resolved, the court approves the plan, and you begin making payments accordingly.

Should I Pick Chapter 7 or Chapter 13 Bankruptcy? What’s Best for Me? 

In deciding between Chapter 7 and Chapter 13 Bankruptcy, Chapter 7 is usually recommended, unless you have specific reasons for Chapter 13.

One situation where Chapter 13 might be beneficial is if you have taxes or other debts that can’t be discharged and are challenging to handle on your own. Also, Chapter 13 might be better if you have a sole proprietorship business needing bankruptcy court protection, or if you can’t file Chapter 7 again within eight years. Opting for Chapter 13 lets you retain certain assets and catch up on overdue secured debt payments. 

For most other cases, Chapter 7 is likely better because it finishes faster, allowing you to rebuild your credit sooner. Also, considering that this is the most affordable option, most especially, for those with limited income and few assets owned. 

The Need for Legal Services of a Reliable Local Attorney

If you are currently encountering grave financial difficulties, it is best to seek legal advice early on. Consider all of your options, including negotiating directly with the debt collector or creditor or filing for bankruptcy.

If you are planning to file bankruptcy, or are wondering if it is the best course of action to take, you need a lawyer who can help you solve your financial problems.

For individuals who are struggling financially because of unemployment, growing medical expenses, credit card debt, marital issues, or other reasons, filing for bankruptcy may be their only choice. 

Here, a competent Portland bankruptcy law firm can help. Consult with a dedicated Oregon bankruptcy lawyer at Northwest Debt Relief Law Firm today.