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7 Reasons Why Chapter 7 is Better Than Chapter 13

7 Reasons Why Chapter 7 Bankruptcy is Better Than Chapter 13 Bankruptcy

Chapter 7 is better than Chapter 13 and here is why. For most people who are looking to file bankruptcy the choice really comes down to filing a Chapter 7 bankruptcy or a chapter 13 bankruptcy. I believe there are at least 7 reasons why Chapter 7 can be preferable over a chapter 13. I believe that in most situations people are much happier with the benefits offered in a chapter 7 bankruptcy case.

1.  Chapter 7 is a Much  Shorter Process

In Illinois the typical chapter 7 bankruptcy last about 3 to 4 months from the date your case is filed with the court. That may seem like a long time but is actually a pretty quick proceeding in the federal court world.    Also, it is a fraction of the time you will spend in a chapter 13 bankruptcy. Chapter 13 cases usually last 5 years. Chapter 7 is designed to get you in, get out, and on with life.

2.  There is no payback on most unsecured debts

In bankruptcy, different debts are treated differently. Essentially your debts are broken down into 2 groups: secured debts (i.e. houses, cars, and anything with collateral) and unsecured debts (i.e., credit cards, medical debts, and personal loans). There is also a subcategory of unsecured debts that are given special treatment – priority debts. Taxes fall into this subcategory. In a chapter 7 bankruptcy case your unsecured debts, with the exception most taxes and nondischargeable debts (child support, student loans, fines, etc.) are completely discharged/eliminated. There is no payment plan. They are eliminated 100%.

Compare this to a chapter 13 case where you are required to pay back (albeit a small amount) of your unsecured debts over the 3 to 5 year. I mentioned above.

3.  Your future income is not part of your bankruptcy

In a chapter 7, the  Bankruptcy Court is most concerned with the amount of income you have earned in the 6 months prior to your bankruptcy filing. The income you receive going forward after your cases filed is not part of what is called your “bankruptcy estate.” There are a couple of exceptions, such as money received from an inheritance within 6 months after your cases filed, but generally money you earned after your cases filed is yours to keep.

In a chapter 13 bankruptcy the income received after your cases is filed his property of your bankruptcy estate and you will be required to turn over your monthly disposable income to the trustee for the benefit of your creditors.

4.  You Can Usually Keep Your Assets and Eliminate Your Debt

One benefit of a chapter 13 bankruptcy does provide is that he will retain possession of all your assets. Some people don’t like chapter 7 cases because there is a small risk that you can lose some of your property through the chapter 7 process. While it is true that in a chapter 7 case there is a risk of losing non-exempt property to your creditors, in most cases nothing is lost. We would not file a chapter 7 bankruptcy for you if it looked like you would lose any assets without first discussing it in great detail with you first.  I believe that approximately 94% of Illinois Chapter 7 bankruptcy filers did not lose a thing through the process.

This is because Illinois exemption laws are pretty good. Most people ever heard of exemption was like the homestead exemption, which protects up to $15,000 of equity in your home. Illinois also has exemption laws that protect your household goods, cars, and retirement accounts, etc. Most people who file chapter 7 don’t lose a thing and get the benefit of the complete discharge of all other debt and the shorter process.

5.  The Attorney Fees for Chapter 7 Bankruptcy are Less

In a Chapter 7 case you are hiring an attorney for a three to four month legal process. In a chapter 13 case you are hiring an attorney for five years. Because of this you are going to pay more for a chapter 13 case than you will for a Chapter 7 case.

6.  There Is No Monthly Payments  To Worry About in Chapter 7

As I mentioned above in number 2, in a chapter 13 case you’re required to pay your monthly disposable income to the court for the benefit of your creditors. In Chapter 13 we put together a payment plan and you’re responsible for making sure that the payment is paid on time each month.  If you stop making these payments for submitting these reports your case can be dismissed.

In a chapter 7 case, because there is no payback of debt there is no monthly payment.

7.  You Will Recover More Quickly From A Chapter 7 Bankruptcy

Most people are surprised that their credit score has actually increased 12 months after their Chapter 7 bankruptcy case is complete. Further, most people are unaware that if you have good payment history after your chapter 7 case, FHA can qualify you for a home loan within 2 years of your bankruptcy case being completed. While you can also qualify for FHA loans while in your chapter 13 case, the reality of this is you are going to have a more difficult time getting financing while you have an active bankruptcy case, and in Chapter 13 you will have an active case for 3 to 5 years.

There is no question that filing a chapter 7 bankruptcy hurts your credit, but it is a static event every day you get further away from it the more likely you will be able to obtain new financing if you need.

Some people will not have a choice because they won’t qualify for Chapter 7 bankruptcy based on their income. However, I evaluate all clients for chapter 7 case and if possible I’ll often recommended recommend it even if that means losing some minimal property.

If you are dealing with the problems I would like to discuss the benefits of chapter 7 bankruptcy filing by offering free consultation where we can meet and determine if it is a good option for you. I can be reached at (630) 879-9559 or via e-mail at

Bankruptcy: not a failure...A Fresh Start! Let Bradley Covey help you understand your bankruptcy options including Chapter 7 and Chapter 13 bankruptcy. Call Today A Fresh Start!
2205 Point Blvd., Suite 130
Elgin, IL
Phone: (847) 608-1313
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About Bradley Covey

Bradley Covey is an Illinois bankruptcy attorney helping individuals and businesses file Chapter 7 bankruptcy and Chapter 13 bankruptcy in Kane County, DuPage County, Kendall County and Will County, Illinois. Brad attended SIU undergrad and NIU College of Law. Brad served in the military at Ft. Stewart, Georgia and Ft. Sill, Ok as a Field Artillery Officer. Brad later served in the Illinois National Guard as a Major.

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