When Chapter 13 May Be A Better Option

If you are experiencing financial difficulties and looking for a fresh start, look no further than filing a Chapter 7 bankruptcy case. Most people who file for bankruptcy choose to file cases under Chapter 7. A Chapter 7 filing is quicker and less expensive. You may get a discharge order in less than four to five months. However, based on other factors, there may be circumstances when filing a Chapter 13 bankruptcy case is a better option.

First, know that Chapter 7 is an excellent option if you own little or no property, have less than the threshold median-level income for your household, have mostly unsecured debt, such as credit card debts, medical bills, and personal loans, and cannot commit to a repayment plan for the next three or five years.

Of course, you must qualify to file a Chapter 7 case. If you do not file because your income is above the threshold median-level income and your deductions are insufficient to reduce this income below this threshold, Chapter 13 is your only option.

If you have disposable income and still qualify for a Chapter 7 filing, you have the option to choose between Chapter 7 and Chapter 13 bankruptcy. The qualified attorneys at the Morrison Law Group can provide the answers necessary so that you may be well informed when considering your best option – Chapter 7 or Chapter 13.

Chapter 13 may be your better option if the following are true:

  • you want to keep non-exempt property;
  • you are delinquent on your mortgage payments;
  • you have more than one mortgage on your home;
  • you have nondischargeable debts;
  • you are delinquent on your student loan payments;
  • you are delinquent on a domestic support obligation;
  • you have a motor vehicle loan with a balance higher than the value of the vehicle;

Chapter 13 is a useful tool if you are delinquent or having trouble making your mortgage payments. If have received a notice of foreclosure, filing a Chapter 13 case allows you to repay your mortgage arrearages through your Chapter 13 repayment plan of reorganization. If your second mortgage is “underwater” and unsecured, you may remove it by filing for a Chapter 13 bankruptcy case.

If you have a car loan and your motor vehicle is worth less than the balance of the loan, Chapter 13 may also help you save more than a little money. If you meet the requirements set forth by the Bankruptcy Code, you can “cram down” your vehicle loan, which means forcing the creditor to accept the value of the car rather than the loan balance. Experienced bankruptcy counsel may be necessary to help you understand your rights in this situation.

Past-due domestic support obligations for alimony or child support may be repaid in a Chapter 13 plan. These debts are not dischargeable unless they are paid in full over the life of the Chapter 13 Plan. For a Chapter 13 Plan that proposes to repay domestic support obligations to be confirmed by the Bankruptcy Court, the plan must pay in full all domestic support obligations owed by the debtor at the time of the bankruptcy filing. The debtor must also be current on all domestic support obligations incurred after the bankruptcy filing. This tool certainly provides a parent or former spouse an opportunity to become current on important financial obligations to family members.

Theron Morrison has helped 8,000 people file Chapter 7 and Chapter 13 bankruptcy cases to gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.


Theron Morrison

Theron Morrison

Utah’s top bankruptcy and consumer protection attorney.