Chapter 7 is the form of bankruptcy that has a primary goal of eliminating most types of debts, including some tax debts. It allows for the continued payment of those assets that need to be kept, such as homes and vehicles.
Chapter 13 can be filed for a number of reasons including to:
- Prevent loss of a home by foreclosure.
- Eliminate or rewrite the terms on a second home loan in certain situations.
- Reduce the debt, and perhaps the interest rate, on vehicle loans.
- Stop further interest and penalties on tax debt that can’t be eliminated by a chapter 7.
- Have access to bankruptcy when chapter 7 isn’t available, which is primarily when there has been a recent prior bankruptcy filing, or the family income exceeds the chapter 7 allowance.
- Seek the discharge of certain types of debts that can’t be eliminated by chapter 7.