Advantages of Chapter 13 -

     Depending on the debtor's particular situation, Chapter 13 may offer many advantages over Chapter 7 liquidation (and Chapter 11 reorganization).

Advantages of filing Chapter 13

Advantages of Filing Chapter 13

 a).  Chapter 13's are purely voluntary--unlike Chapter 7 or 11, where creditors can file an involuntary petition against the debtor.
 b).  After filing, a debtor may dismiss his case at any time during the proceedings--in Chapters 7 and 11, on the other hand, the right to dismiss is severely limited.
 c).  The debtor retains all of his property, exempt and nonexempt, and no assets are seized by the trustee. The only property that goes to the trustee is the debtor's post-petition earnings or other source of plan payment.
 d).  The debtor is not required to deal directly with his creditors. The trustee acts as essentially as debtor's disbursing agent, collecting monthly payments from the debtor and periodically remitting them to creditors.
 e).  Only the debtor (not the creditors or the trustee) may file a Chapter 13 plan.
 f).  Creditors are not allowed to vote on the plan. In Chapter 11, creditors are allowed to vote on the plan and the plan must generally receive a simple majority (2/3 majority in money amount) of votes to be confirmed. Creditors and the trustee may object to confirmation of the plan, but the plan can be confirmed over such objections if the Court finds that the debtor has met all the requirements of 11 U.S.C. Section 1325(a).
 g).  A debtor whose home is in foreclosure may file Chapter 13 and stop the foreclosure, and cure the delinquent payments over a 3-5 year period. During the case, he is required to keep the post-bankruptcy payments current. This is not available in Chapter 7.
 h).  A debtor who has a trust deed or mortgage in second priority position on his home or other real estate may "strip off" that lien completely, if the court finds that the property is not worth more than the first mortgage or trust deed. In this instance, the claim is treated as
completely unsecured, and provided the same repayment treatment as credit card and other such debts. Lien stripping is not available in Chapter 7.
 i).  Chapter 13 is generally less expensive than Chapter 11, in terms of attorney's fees, court fees, and other costs.
 j).  A debtor who may not obtain a discharge in Chapter 7 based on the "means test", may be able to obtain Chapter 13 relief.
 k).  A debtor who has gotten a Chapter 7 (or Chapter 11) discharge in a case commenced within the past 8 years, can file Chapter 13 and receive a discharge, but not another Chapter 7 or 11.
 l).  There is a "co-debtor stay" in Chapter 13, limiting creditors' collection efforts against co-signers on consumer debts. No such stay exists in Chapters 7 or 11.
 m).  Taxes that are not dischargeable in Chapter 7 can be paid off in a 3-5 year Chapter 13 plan, without payment of interest and penalties past the petition date.
 n).  Credit reporting agencies generally report Chapter 7 filings for 10 years, but Chapter 13 filings for only 7 years.
 o).  It is possible that future creditors will view a Chapter 13 more favorably than a Chapter 7, due to the debtor's attempt to pay back at least a portion of his debt.


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Written by Henry Rendler

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