Chapter 13 is usually preferable to a Chapter 7 when you need or want to reorganize and repay your debts. Examples include preventing repossession of your car, foreclosure of your home, taxes, fines, restitution, student loans, and child support delinquencies, as well as getting your driver’s license back.
When your home is set for foreclosure sale because you are behind in your payments, Chapter 13 can stop the foreclosure sale and help you keep your home. You can make back payments through your Chapter 13 while you make the monthly mortgage payments that come due after filing the Chapter 13 and the mortgage company can be forced to accept the Chapter 13 plan. When car, furniture or other payments are behind with creditors threatening repossession, Chapter 13 provides a court order that stops the repossession.
Another compelling reason for filing Chapter 13 is that if you have debts that are not dischargeable in a Chapter 7, you can force creditors into a repayment plan. For example, if you owe IRS taxes which are non-dischargeable, you can require the IRS to accept monthly payments throughout the Chapter 13 plan and avoid wage levies or seizure of your assets.
A Chapter 13 plan allows debtors to make payments over a three to five year period, reorganizing their debts and adjusting payments to a level that their budget will allow. Another reason to file 13 over a 7 is that some debtors may be ineligible to file a Chapter 7. I f you file a Chapter 7 you cannot file another one for six years, but you can still file a Chapter 13 during those six years.