Chapter 7 or Chapter 13: four questions that decide it
Most people who call us already know they need help. What they don't know is which kind. These four questions settle it for most households.
1. Is your household income under the limit?
Chapter 7 has an income test. If your household earns less than the median for a family your size, you usually qualify. If you earn more, a second test looks at what's left after your real expenses. We run both on the first call.
2. Are you behind on the house?
Chapter 7 doesn't give you time to catch up on a mortgage. Chapter 13 does: the missed payments are spread over three to five years. If you want to keep a house you're behind on, Chapter 13 is usually the answer.
3. Are you behind on the car, or does it owe more than it's worth?
In Chapter 13, a loan on a car you've had for a while can sometimes be lowered to what the car is worth. In Chapter 7 you keep paying the loan as it is, or give the car back.
4. Is there property you'd lose in Chapter 7?
Exemptions protect a set amount of each kind of property. If you have more equity than they cover, Chapter 13 lets you keep it by paying its value through the plan.
If none of these four point to Chapter 13, Chapter 7 is usually faster and cheaper.
Every case has its own details, and this guide isn't advice about yours. Bring the answers to a free call and we'll check them with you.