What determines if I file Chapter 7 or Chapter 13?
First, I look at your income.
If your income is below the median, or average, income for your family size, then you will probably qualify for Chapter 7.
This doesn’t mean a chapter 7 is the best route for you to take.
If your income is above the median then we have to do the means test.
See my ultimate guide for more information on the means test.
The means test will tell you whether or not you may be able to file chapter 7 even if your income is above the median or whether or not you probably are going to be filing a chapter 13.
Many people qualify for relief under both Chapter 7 and Chapter 13.
The right chapter to file, if you are eligible to file both chapters, will depend on your personal circumstances and your goals.
Although you may be able to file chapter 7 a chapter 13 could offer more benefits.
You may actually lower your overall household expenses by being in a chapter 13 and have more money available to take care of your family’s needs, in chapter 13.
And, of course, there are some situations where a person has suffered such a catastrophic loss of income that they cannot even afford to file a chapter 13 if they wanted to.
When this happens, people are often faced with surrendering cars they can no longer afford or even, sometimes, not being able to keep their home.
Fortunately, in most cases, unless your income is been drastically reduced, you have options in both chapter 7 and 13.
Knowing which is the best chapter to file will depend upon a comprehensive analysis of all of your circumstances as well as your needs and your goals.