There are a number of reasons that one may file Chapter 13 bankruptcy instead of Chapter 7. Some people simply make too much money and do not meet the income requirements to qualify for Chapter 7. Some people may have filed a previous Chapter 7 bankruptcy within the past 8 years and thus are not eligible to file another Chapter 7 at this time.
Other people file Chapter 13 because they are behind on their mortgages or car loans. Many of these people are facing foreclosure or repossession of their property. Chapter 13 allows one to keep up with current payments and make monthly payments toward the past-due balances. This allows the debtor to keep his or her property and get current on the mortgage or car payments.
People may also file Chapter 13 because of tax debt. Certain tax debt is not dischargeable in a Chapter 7 bankruptcy. Chapter 13 allows the debtor to repay the tax debt over a 3 to 5 year period.
Another reason one may choose to file Chapter 13 bankruptcy over Chapter 7 is to keep non-exempt property. Some people have a large amount of valuable property. For these people, filing Chapter 7 may require the debtors to give up some of the property. Thus, instead of giving up the property, the debtors choose to file a Chapter 13 repayment plan and keep all of the property.