There are many reasons why you may wish to file for Chapter 13 bankruptcy rather than for Chapter 7. For the most part, you should have no problems filing for Chapter 13 if any of the following circumstances apply:
You truly wish to pay back your debts but require protection from the courts to do so. You feel it is the right thing to file for Chapter 13 instead of 7.
You are behind on paying your car loan or mortgage and intend to make up the missed payments, which is not possible in Chapter 7.
You want to repay your bills now but, in the event you somehow continue to incur debt, you need to have the option to move over to Chapter 7 in the future.
You farm for your family and intend to pay off debts, but your debt is unrelated to farming and disqualifies you from Chapter 12.
You have a wealth of valuable property that is not exempt from liquidation and you wish to keep it, unlike what is possible in Chapter 7.
You have, in the past eight years, filed for Chapter 7. It is impossible to file for it again until eight years have gone by.
You can file Chapter 13 under the following instances:
You have received a Chapter 7, 11 or 12 discharge over four years ago or under Chapter 13 over two years ago;
You have a personal debt with a co-debtor. In Chapter 7, the creditor will visit your co-debtor looking for payment, but this is not the case in Chapter 13, provided you actually keep up with your plans for repayment; or
Your debt is due to tax.
It is possible to discharge your debts in Chapter 7 provided all of the following circumstances exist:
Your taxes are due to income, as opposed to payroll taxes, which will never be eliminated in an instance of bankruptcy.
You did not willfully commit evasion or fraud. You did not try to avoid paying taxes, such as by using a fake SSN on your return, nor did you file a fraudulent return.
You have passed the rule that the tax return was returned over three years prior to the filing of bankruptcy.
You have filed the tax return over two years prior to filing for bankruptcy, and it does not count if the IRS files a substitute return unless you signed and agreed to the filing.
You had the IRS access your tax debt over 240 days prior to filing or never had it assessed.
After your bankruptcy, your property can be seized. However, this does not mean that they will immediately come and do it; for the most part, the IRS will only take pensions, retirement accounts or real estate, and this is only when the taxpayer does not bother to resolve their problem. The IRS is also required to have such a seizure approved due to concerns regarding negative publicity.
