In 2010, 1,139,601 Chapter 7 bankruptcy cases were filed across the nation, with 1,100,116—the vast majority—being filed by individuals or couples. Single women account for almost a third of all bankruptcy filings, single men a fourth, and the remainder of bankruptcies are filed by couples. Unemployment and medical expenses are the primary reasons bankruptcy becomes a necessity. While nobody ever expects or wants to file for bankruptcy, sometimes it is simply the best choice for the future. Chapter 7 bankruptcy in particular can give you a fresh start, financially speaking. However there are some cases where Chapter 13 bankruptcy is a better option.

If you are contemplating filing for bankruptcy, it could be extremely beneficial to speak to an experienced Eagle, Idaho bankruptcy attorney to help you determine which type of bankruptcy is best for you, and how to proceed. If you are an individual or small business owner, then Chapter 7 is likely to be the better choice, unless you make too much money to qualify, or you have lots of properties that you want to keep. Chapter 7 bankruptcy is often known as “liquidation” bankruptcy, while Chapter 13 bankruptcy is known as “reorganization” bankruptcy, or, sometimes, “wage earners” bankruptcy. The latter term is somewhat misleading, as those file Chapter 7 are most likely wage earners as well. Below are some of the facts regarding Chapter 7 and Chapter 13 bankruptcies:

Most all of your unsecured debt (credit card debt, payday loans, etc.) will be discharged in a Chapter 7 bankruptcy, although there are some exceptions (student loans, spousal support, back child support, taxes) If you choose Chapter 13 bankruptcy, your creditors will be paid, although it is possible not all of them will be paid in full. You will determine a 3-5 year repayment plan which must be approved by the court.

While a typical Chapter 7 bankruptcy takes 4-8 months to complete, while your Chapter 13 bankruptcy will not be considered “complete” until the 3-5 year repayment plan is complete. Once your repayment plan is completed, some of your unsecured debt may be discharged.

Under Chapter 7 bankruptcy, you will likely be able to keep most of your property, although if you have significant equity or assets which are not exempt, you could lose those in a Chapter 7 bankruptcy filing. Under Chapter 13, no property is liquidated. You must meet the income levels to file for Chapter 7, or pass the means test, while to file for Chapter 13, you must only have a regular income, and be able to meet your monthly payment obligations.

If you are facing foreclosure of your home, Chapter 7 can forestall that, at least temporarily, however if you are unable to bring your mortgage current, the foreclosure will continue.

Under Chapter 13, a foreclosure can be stopped, and you will be able to make up past due mortgage payments under your Chapter 13 payment plan. While there is no income level requirements for Chapter 13, there are unsecured and secured debt requirements. Both Chapter 13 and Chapter 7 foreclosures require a considerable amount of paperwork, and have many filing deadlines.
There are two more types of bankruptcy, but these are available only under specific, limited circumstances. Larger businesses and corporations will generally use another type of reorganization bankruptcy, known as Chapter 11. While an individual could, theoretically, file under Chapter 11, it would rarely make sense to do so. Chapter 12 bankruptcy is only for fishermen and farmers. The repayment plans under Chapter 12 are usually more flexible than those under Chapter 13, plus there are higher debt limits under Chapter 12. Finally, there are more options for lien stripping on any unsecured portion of a secured loan under Chapter 12 bankruptcy. Lien stripping is generally used to get rid of a second mortgage or a home equity line of credit, particularly when a homeowner owes more on his or her home than the house is worth.
If you have limited income, don’t have a significant amount of equity in your home, and only have one car with a loan against it, a Chapter 7 bankruptcy could potentially be the most effective—as well as the fastest and easiest—type of bankruptcy to get rid of your debt. If you are a homeowner whose property value is below the value of the mortgage against it, Chapter 7 is still likely the best option, because your home with its upside-down mortgage will be protected from liquidation. Once you file Chapter 7 bankruptcy and no longer owe monthly payments on your unsecured debt, your mortgage will likely become much more manageable.

If, however, you have a significant amount of equity in property (over $100,000), then Chapter 7 is probably not the best option. If the Idaho homestead exemption fails to cover the equity in your home, you could lose your house under Chapter 7, but you would be allowed to keep the house in Chapter 13 so long as you remained current on your mortgage.
In fact, Chapter 13 is a good way to catch up on past due home payments, when you have fallen behind. If your current monthly income for the past six months happens to be more than the median income for a household of your size in the state of Idaho, then Chapter 13 will be the better option. Your disposable income is determined by subtracting certain expenses and monthly payments from your regular income; if the result exceeds limits set under Idaho law, then you will have to file for Chapter 13 rather than Chapter 7.

If you have significant student loan debt or tax obligations which cannot be discharged under Chapter 7 bankruptcy, then Chapter 13 bankruptcy will allow you to include them in your payment plan, and pay them off over time. If you have a sincere desire to repay your debt, but want some protection from creditors while you do so, then Chapter 13 is the better option, or if you have significant levels of non-exempt property that you want to hold on to, Chapter 13 is definitely a better choice. Finally, if you have personal debt which has a co-debtor, then if you file for Chapter 7, your creditors will probably go after that other person for payment. So long as you maintain your regular monthly payments under Chapter 13, your co-debtor is likely to be left alone.

While it can be difficult to admit you simply cannot get out of debt on your own, it could be time to face your financial facts. Trying to ignore a pile of unpaid bills, or the creditor phone calls and letters in the mail, is not the answer. Instead, talk to an experienced Eagle, Idaho bankruptcy attorney who can discuss your options with you and help guide you through the process of Idaho bankruptcy.

Additional Resources





Joe was born and raised in a small town in south east Kansas. After doing a short stint in college in Coffeyville, KS, Joe joined the United States Air Force and served for four years as an aircraft electrician on F-15’s. Joe was stationed in Mountain Home, AFB and was deployed to Afghanistan and South Korea. After leaving the service, Joe returned to Kansas to attend law school. After law school, Joe began practicing in Montana for several years until he made the decision to return to Idaho and open his own practice. Joe is dedicated to providing aggressive representation for the individuals of the treasure valley and the State of Idaho.