Should I file Chapter 7 or Chapter 13?

It depends on exactly what you are trying to achieve, and on how your numbers work out. Sometimes the decision is not yours to make. If we subtract your normal monthly living expenses from your normal monthly income and get zero, or less, then you are looking at a Chapter 7 because there is simply no money left to pay into a Chapter 13 case. On the other hand, if there is some money left over after we do that calculation, then you are looking at a Chapter 13. You could file a Chapter 7, but your case would either be dismissed or you would be forced back into a Chapter 13.

But there are times when it could go either way. Every case has to be analyzed on its own before the decision can be made. Two people might have the exact same income, the same level of debt, and similar assets, and one might end up in a Chapter 7, and the other in a Chapter 13. Here is one example of how this could happen: Imagine that you are making payments on a new car that you bought last year. You are current on your car payments, but behind on many other debts. If you filed a Chapter 7, and if the finance company is willing to reaffirm the debt with you, those car payments would remain the same, and that would be counted as one of your legitimate monthly expenses. The calculation of income minus expenses would put you into Chapter 7 territory. On the other hand, if you surrendered that car to the creditor, it would no longer be an expense, and your calculation would no longer put you into a Chapter 7. On top of all of that, in the exact same situation you would be able to file a Chapter 13, keep the car, and lower your monthly payments through the Chapter 13 process, and possibly save enough money to save some other secured item that you would otherwise have to surrender. Obviously, in this situation we would want to carefully consider all of your options, and all of your personal goals.

Another way to look at it is that in a Chapter 13 case you have an absolute right to keep secured property (such as your home, car(s), furniture, appliances, etc.), as long as you can make certain payments, but in a Chapter 7 you are risking losing some or all of those things. If you want to save the house or the car, and if we can make your numbers work, then you want to file a Chapter 13. If all you have is unsecured debt (medical bills, credit card debt, etc.) Then you want to file a Chapter 7, if the numbers will permit it.