CREDIT
When to Choose Chapter 13 Over Chapter 7
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When Bankruptcy May Be Your Best Option
Filing for Chapter 13 bankruptcy protection might make more sense than Chapter 7 in certain circumstances. These include:
1.
You are behind in mortgage payments on your home. If you want to save your house, you can propose a repayment schedule under Chapter 13. "If you file Chapter 7, you will probably lose your home," says attorney Robin Leonard.
2.
Unpaid taxes represent the bulk of your debt. Taxes typically cannot be discharged under either Chapter 7 or Chapter 13. However, under Chapter 13, you can propose a repayment schedule where you will pay less than the full amount of tax. Further, "if you file Chapter 13, you stop all future tax and interest and penalties from accruing from the day you file," Leonard says.
3.
You have substantial debts in the category of what the government refers to as "bad actions," such as embezzlement, fraud, willful or malicious actions or marital debts. These are not dischargeable under Chapter 7. But if you file Chapter 13, you will have to pay only a portion of these debts.
Some debts may not be discharged under Chapter 7 but may be in Chapter 13, according to Leonard. These include debts that the creditor proves you incurred on the basis of fraud or other alleged criminal activity. They also include recent purchases for luxury goods, cash advances or loans of more than $1,000 within 60 days of filing. 
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