A common question I hear as a bankruptcy attorney is whether someone considering personal bankruptcy should file under Chapter 7 or Chapter 13. Usually, Chapter 7 is more desirable, since it wipes out all of your dischargeable debt; Chapter 13 merely reorganizes your debt into smaller amounts payable over 3-5 years. However, occasionally Chapter 13 is a better deal, and sometimes clients simply do not qualify for a Chapter 7 or do not want to give up an asset they would lose in a Chapter 7.
Chapter 13 can be a better deal if you have a second mortgage on your home. Generally you can keep your house when you file bankruptcy, unless you have more than $150,000 equity in it (the amount varies by state). But if you have a second mortgage, the best you can do is get it reorganized and reduced in a Chapter 13. If you owe $100,000 on a second mortgage, and have $75,000 in dischargeable debt, it is probably better to file Chapter 13. (There are some nuances to this, if you would like to set up a free consultation with us you can contact us at AlexanderBankruptcyLawFirm.com)
There are income caps to filing Chapter 7. In Arizona, you cannot make more than $55,000 per year in order to qualify. There are exceptions to this, and a married couple has a higher threshold.
In a Chapter 7 bankruptcy, you are permitted to keep one car per adult filing as long as the equity you own in the car does not exceed $5000 (the amount varies by state). You cannot own extra recreational vehicles or toys like a boat. Someone who does not want to give up their car that has over $5000 in equity or extra toys might want to file Chapter 13 instead for that reason. In a Chapter 13, you can keep all your property.
The Alexander Bankruptcy Law Firm provides low low cost Chapter 7 and 13 personal bankruptcies. $995 Chapter 7 or $2500 Chapter 13 bankruptcies plus court filing fee. Free consultation with a compassionate attorney who will handle your case personally. Call 24/7, available to meet with you around your schedule. 602-326-9116. Conveniently located in Central Phoenix along the Camelback corridor. AlexanderBankruptcyLawFirm.com