ANSWER: If you are behind on payments for your house or a car that you don’t want to surrender in bankruptcy, a Chapter 13 allows you to spread out the past-due amount over the lifespan of your payment plan. Even if you aren’t behind on payments, you may not be able to keep those assets in a Chapter 7 if they are above your state’s exemption amounts. If you have a car with more than $6,000 equity (for single filers, $12,000 in one vehicle for married filers), you would have to surrender it in a Chapter 7. A Chapter 13 doesn’t require your assets to be under the exemption amounts for your state.
Sometimes Chapter 7 isn’t an option at all. You may not qualify because of income (see above). If you have previously filed a Chapter 7, you will have to wait 8 years until you can file Chapter 7 again. However, if you need the protections of bankruptcy now, you can file a Chapter 13. If the 8 year period expires during your payment plan, you may be able to convert back to a Chapter 7 if you otherwise qualify.