Most people assume that if you are filing for bankruptcy, you should file for chapter 7 instead of 13. It is because of the former demands that debtors pay the debt they owe. With the latter, however, your qualifying debt gets wiped out without the repayment plan. However, things are not always as straight forward as they sound. With all these chapters, some unique tools enable you to find solutions to various issues.
A great example is when you need to save your house and land from foreclosure. During that time, according to US courts, you will need to file for chapter 13 bankruptcy. With chapter 7, you cannot hold on to any property you have, if you cannot repay its debt.
Some specific individuals are not allowed to file for chapter 7 and have to go with chapter 13. Some issues disqualify you for chapter 7 debt, especially if your earnings before filing for bankruptcy have been more than that of an average household in your area.
You will also not qualify if your expendable income will exceed the amount the law has set. There is a mean test that determines whether you can pay back the debt you owe with chapter 13 repayment plans.
These tests are sophisticated and give different individuals unique definitions for incomes, expenses, and disposable incomes. They also, therefore, have different abilities to repay the loan. The terms may make it seem like your expenses are less, and your income is higher than the actual figure.
Keep in mind that your creditors will force your co-debtors to repay your loan when you choose the chapter 7 bankruptcy.