Which is better to file – Chapter 7 or Chapter 13?


The first question I am asked by a potential South Carolina bankruptcy client is which chapter is best for them – Chapter 7 or Chapter 13 bankruptcy. Often, a potential client has done some preliminary research on the internet or they have some friends and family that have filed for bankruptcy before. While this information maybe helpful to the potential client in some ways, I need to analyze their full situation before I can give them an honest opinion. What information do I need? I need everything! I  need to know all of the potential clients’ assets, income, income history, potential changes in income, prior bankruptcy filings, actions leading up to bankruptcy, and much more. Many times this will scare a potential client away from bankruptcy if they are told they have to disclose all of this information. Often they will ask “Why does the Court need to know all my information”. I have a simple answer – bankruptcy is voluntary. You do not have to file. However, if you do and you want the protections and benefits  of the bankruptcy court, you have to play by their rules. If you do, most debtors experience a pleasant outcome.

Once I have been given all this information, I can quickly paint some different options for the prospective client. In some cases, Chapter 7 and Chapter 13 bankruptcy are both available as options. In other cases, only one or the other is available due to the person’s circumstances. Let me give you an example. A married couple comes to see me. I quickly ascertain they have a joint income of $35K, no prior filings or transfers of assets, no assets above the South Carolina exemption guidelines, no real estate, and they own their used cars. They have no secured debts and have approximately $35K in unsecured debts. In a situation like this, a Chapter 7 bankruptcy would be their best option. While they could file a Chapter 13 bankruptcy and make monthly payments, the prudent choice would be a Chapter 7 bankruptcy to get a fresh start and to move on with their lives.

Another example would be the same couple has mortgage and car arrears. In a situation like this, a Chapter 13 bankruptcy would be the best option to save the home and car. In this case, we could file a Chapter 13 plan to save both the house and car.

The Bankruptcy laws also allow individuals to change or convert their bankruptcy if they feel they made the wrong initial choice. Either way, Chapter 7 or Chapter 13 bankruptcy can help a person with many types of debts to include mortgage arrears, car arrears, credit card debt, medical bills, IRS tax debt, finance loans, and many other types of debts.

If you want additional information about Chapter 7 or Chapter 13 bankruptcy, please feel free to call me for a free consultation. We offer phone, skype, or in person consults at our Columbia, Greenville, or Florence, South Carolina offices.

- Stone Law Firm