Although people usually prefer to file a Chapter 7, sometimes a Chapter 13 is the advisable and smart thing to do…even if you are under the means test and qualify for a Chapter 7. This is because there are some things you can do in a 13 that you cannot do in a Chapter 7. Below is a list and explanation of some things you can do in Chapter 13 but not a Chapter 7.
Paying back taxes interest and penalty free: When you file a Chapter 13 you can, take care of your back taxes and other debt in one payment. What’s more, the interest and penalties on the taxes stop accruing. This can be a great way to kill two birds with one stone…especially when you remember that usually taxes are dischargeable in a Chapter 7.
Protecting non-exempt assets: Sometimes people have fairly valuable non-exempt assets they want to keep. Campers, boats, land are common examples. Through a Chapter 13, you can keep such property provided your payments are large enough and you will get more time to do it. A Chapter 7 trustee will generally will give you six months to pay back the value of non-exempt assets whereas you take up to five years to essentially do the same in a Chapter 13.
Stripping second mortgage: If you have a second mortgage and your home is worth less than the first mortgage, you can eliminate the second mortgage altogether. This can only be done in a Chapter 13. Click here to see more.
You have previously filed a Chapter 7 in past eight years You can only file a Chapter 7 once every 8 years. If you need additional protection, you can still file a Chapter 13 even if you have file a Chapter. And as
Three year plan vs. Five Year Plan:
Chapter 13 plans for those over the means are five years or 60 months. However, if you are under the means test and you still want or need to file a Chapter 13 for the above reasons, your plan is only three years. But if you need the extra two years to pay back taxes or mortgage arrears in a more palatable way, you can chose a five year plan if you so desire.
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