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How Does A Chapter 7 Bankruptcy Compare To A Chapter 13?

Robert J. Adams & Associates Sept. 13, 2017

When you have a great deal of debt that cannot be managed the best solution is to file a Chapter 7 bankruptcy. There are, however, situations where filing a Chapter 7 is not possible or is not in a person’s best interest: filing a Chapter 13 is the best path for you.

This article is only a guide and not legal advice. When the reader wants to know and understand their options they should always consult with a law firm that is experienced in bankruptcy law. We, of course, hope you give us a call. Our consultations are always Complimentary and confidential.

Two FREE eBooks are available for download on our website:

  1. A General Guide of Bankruptcy Laws

  2. SAVING YOUR HOME and Other Real Estate in Illinois

Or, you can call us and we will email one or both books to you.


(Below there are frequent references to dividends to unsecured debts. What this means is the percentage to unsecured debts: like a 10% dividend would mean repaying only 10% of what is due)

  1. When an individual has filed a Chapter 7 within the past 8 years. A full article on timing can be found on our website here.

  2. Your car was repossessed or is in danger of repossession and you want to keep your car. Then filing a Chapter 13 is the best option.

  3. Foreclosure or in danger of a foreclosure and you want to save your home. Our FREE eBook sited above goes into a great detail on the use of our American Bankruptcy Laws.

  4. Your real estate taxes have been sold and the expiration of the redemption is coming up. A Chapter 13 allows you to repay the taxes over a period up to 5 years and you save your home.

  5. Condominium arrearages. You owe back condo dues and want to keep your condo. Chapter 13 allows you repay the arrears over time. A full article can be found at this link.

  6. You owe IRS debts. While some IRS can be discharged in a Chapter 7; some cannot. A Chapter 13 allows you to pay the IRS debts that can’t be discharged in Chapter 7 over a long period of time and the remainder repaid with a very small dividend. 

  7. High Income earners can’t get past the Means Test. Even if you can’t get past the Means Test with all possible deductions you may still be able to file a Chapter 13 paying less than 100%. A full article can be found here.

  8. You have a second mortgage but the value of your home is less than the first mortgage balance. In a Chapter 13 filing you can eliminate the 2nd mortgage lien. Our FREE eBook on Saving Your Home listed above has a full Chapter on the subject or read our article on Eliminating 2nd mortgages at this link.

  9. Parking tickets, red light tickets, and toll way debts cannot be discharged in a Chapter 7 but can in a Chapter 13. If your driver’s license has been suspended for these debts you can get your license back. The dividend to these debts in Chapter 13 cases is generally very, very low.

  10. Protecting co-buyers or co-signers. A Chapter 13 plan can be set up so that the debt to a co-signer or co-buyer will be paid 100% over a period of time and the remainder to be paid a very, very low dividend.

  11. When your assets net of liens and exemption is a lot of money a Chapter 7 trustee would sell them for the benefit of creditors a Chapter 13 is most likely the way to go. Typical examples of this are a home with a lot of equity; a high valued car with no liens; or, a pending Personal Injury case (whether a law suit has been or not). Our firm does a lot of work using a liquidation analysis that frequently demonstrates that the client can repay unsecured debts with a dividend of much less than 100%.

  12. There are debts that cannot be discharge in a Chapter 7 but can be repaid over a period of time in a Chapter 13 with the remaining unsecured being paid with a small dividend.

For more information on Chapter 7 vs Chapter 13, a Complimentary consultation is your next best step. Get the information and legal answers you are seeking by calling today.