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Why File Chapter 7 Bankruptcy Instead Of Another Type

When an individual or couple files for bankruptcy, one of the first decisions to be made is what type of bankruptcy to file. According to Cornell University Law School, chapter 7 is the most common type of bankruptcy. Why do people choose to file chapter 7 rather than another type, and is chapter 7 the right type of bankruptcy for you to pursue? What are the differences between the Chapter 7, Chapter 11 and Chapter 13

Advantages to Filing Chapter 7


Chapter 7 is usually the fastest option when it comes to bankruptcy. A Chapter 7 filing may take as little as 3 months and is usually completed in about 6 months. Compare that to about a year for Chapter 11 and five years for Chapter 13. 

The reason a Chapter 7 bankruptcy has a shorter timeline is because the person filing doesn’t have to spend time paying back any of the debts. The person who has filed for bankruptcy simply goes on with life and attempts to rebuild credit. A Chapter 13 and Chapter 11 require the person filing to commit to repaying some or all of the debts incurred within a specific amount of time. 

Debt Relief

When you file a Chapter 7 bankruptcy, you can expect to come out of it without owing anything on credit cards and most other loans. You will still be obligated to pay some debts such as student loans, child support and taxes owed, but most of your debts will be canceled.

Keep Your Home

Even though Chapter 7 is a liquidation type of bankruptcy, in most cases you will be allowed to keep your house and some other personal property. Your mortgage obligation will not be erased, but you can continue making your house payments and keep living in your house. 

Quickly Rebuild Credit

Because a Chapter 7 bankruptcy can be completed relatively quickly and does not require a repayment plan, the person filing the debt can begin to rebuild credit right away. This means that the person filing Chapter 7 could have significantly better credit in the same period of time that the person filing Chapter 13 is still paying bills. 

A Chance to Start Again

When you file a Chapter 7 bankruptcy you are asking for the chance for your financial debts to be forgiven and to start your financial life over. While it is not ideal to begin with no credit history and a bankruptcy on your record, that is much better than drowning in debt. 

You will only be allowed to file Chapter 7 once every 7 years. This type of bankruptcy is meant to be something that only occurs once in a person’s financial history. 

Differences between Chapter 7, Chapter 11 and Chapter 13

Chapter 11

Chapter 11 bankruptcy is one that usually involves a large corporation. The company may be millions of dollars in debt but can adjust those debt payments in a way that allows it to continue operating. 

Individuals occasionally file Chapter 11, but this is rare. 

Chapter 13

Most people who chose to file Chapter 13 do so because they do not meet the requirements to file for Chapter 7. If the court looks at your income and assets and determines that you have the ability to pay your debts, you will not be able to file for Chapter 7. 

The person filing a Chapter 13 bankruptcy keeps any property that is already owned. The courts work to design a plan for the person to repay the debts. The plan is typically structured to last between 3 and 5 years. 

If you are in debt and do not have the ability to get out of it yourself, Chapter 7 bankruptcy may be the best option for you. Contact a chapter 7 bankruptcy attorney to help you finalize your decision and began the process.

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