Typically, most people with overwhelming debt, who have decided to file bankruptcy, want to file a Chapter 7. There are some good reasons for this: A Chapter 7 is the fastest (100 days from “filing” to “discharge”); the simplest; and the most economical of all the bankruptcy chapters. So it makes good sense to first try and fit into a Chapter 7. However, there may be one or more good reasons to consider a Chapter 13 bankruptcy.
One of the basic criteria for a Chapter 7 is falling below the income ceiling (often referred to as the “means test tables”). This dollar figure is determined semi-annually by the US Trustees Office (see current Nebraska Means Test Tables). For example, currently, the gross combined income for a family of two people must fall below $60,436 in order for the couple to file a Chapter 7 bankruptcy. The more people in the family unit, the larger the figure. For a family of seven, as an example, the median income figure jumps to $98,777.
Waiting Period Following a Previous Bankruptcy
If you have previously filed bankruptcy, there are rules on waiting periods before filing another bankruptcy, which must be followed. If your previous bankruptcy was a Chapter 7, the rules provide that you must wait eight (8) years before filing your next Chapter 7 bankruptcy. However, if your previous bankruptcy was a Chapter 7, you only need to wait four (4) years to file a Chapter 13. If your previous filing was a Chapter 13 bankruptcy, a (6) six year wait is required before filing a Chapter 7 bankruptcy.
Debt Payments Required by a Divorce Decree
If you’ve been through a divorce, you’ll want to review your divorce decree. If you agreed to pay off certain debts, and your decree orders you to pay those debts, attempting to discharge them in a Chapter 7 may not work. By law, your x-spouse could motion the district court, where your divorce decree was entered, for an Order directing you to pay these debts regardless of your Chapter 7 bankruptcy filing. However, bankruptcy law allows you to discharge these divorce decree debts in a Chapter 13. So, if the decree debts are substantial, and your x-spouse is likely to return to court seeking payment, a Chapter 13 might appeal to you.
A final consideration in deciding whether to file a Chapter 7 or a Chapter 13 in Nebraska is “exemptions”. Because Nebraska’s one Chapter 13 Trustee is not also a Chapter 7 Trustee, the guidelines used in considering your claimed exemptions may be different. An exemption which may be very questionable to one of the Chapter 7 Trustees, may have a history of acceptability by the Chapter 13 Trustee. Frankly, this is where the seasoned, bankruptcy attorney can best advise you. What might be a very long, expensive, and questionable battle in one chapter of bankruptcy, could be a simple fix in another chapter of bankruptcy. A subtle nuance only understood, and appreciated, by an experienced bankruptcy attorney. As you can see, while everyone is drawn to the attractions of a Chapter 7 bankruptcy, there may be good reason to file a Chapter 13 instead. When reviewing your case with your bankruptcy attorney, you should ask, “Which bankruptcy chapter would be most advantageous for my situation?”