Most people walk into my office believing the same thing: that Chapter 13 is the consolation prize you get stuck with when you make too much money to qualify for Chapter 7. I hear it almost every week. “I only want to file if I can do a Chapter 7.”
I want to push back on that, hard, because it is one of the most expensive misconceptions in consumer bankruptcy. Chapter 13 is not a punishment. It is not a fallback. It is a powerful financial tool, and depending on what you are trying to protect and what you are trying to accomplish, it may be the better option even when Chapter 7 is on the table.
My name is Dan Riggs. I run Riggs Law Firm in the Las Vegas area, and I have spent more than fifteen years in bankruptcy practice — including representing a Chapter 13 bankruptcy trustee for most of that time. I have conducted thousands of 341 Meetings of Creditors from the trustee’s side of the table. That experience changes the way I look at every case I file today, and it is the lens I am going to use to walk you through this decision.
Start With the Right Question
The question is not “which bankruptcy do I qualify for?” The question is, “what am I trying to accomplish, and which tool gets me there?”
Bankruptcy is in the United States Constitution. Our Founding Fathers gave Congress the power to pass uniform bankruptcy laws before the Bill of Rights was written, because they did not want a country with debtor prisons. Bankruptcy was always intended to be a financial reset — a tool that lets honest people get back on their feet and build something. When you start from that premise, the choice between Chapter 7 and Chapter 13 stops being about shame and starts being about strategy.
The Thirty-Second Version
Chapter 7 is a liquidation. It typically takes four to six months from filing to discharge. Most unsecured debt — credit cards, medical bills, personal loans — is wiped out. In exchange, a Chapter 7 trustee can sell any assets you cannot fully protect with an exemption.
Chapter 13 is a reorganization. You commit to a three-to-five-year repayment plan based on what you can afford. In exchange, you can keep assets that Chapter 7 might take, catch up on debts you are behind on, and address debts that Chapter 7 cannot touch at all.
Most national articles stop there. That is not enough to make a real decision. The real analysis happens in the details that follow.
Where Chapter 13 Beats Chapter 7 — Even When You Qualify for Both
1. You Are Behind on Your Mortgage
This is the biggest one in Nevada. We have a program here called the Mortgage Modification Program — MMP for short — that is overseen by the bankruptcy court. You must be in a Chapter 13 to participate.
MMP opens up real possibilities when no other modification program is available. I have seen cases where arrears were forgiven, interest rates were reduced, and monthly payments were brought down to something the homeowner could actually live with. Most importantly, the arrears stopped hanging over the homeowner’s head.
Now contrast that with Chapter 7. If you are significantly behind on your mortgage and you file Chapter 7, nothing in the bankruptcy itself catches you up. The lender’s right to foreclose is paused briefly, and then it resumes. You lose the house. In Chapter 13, you get a structured path to save it.
2. You Have Debts Chapter 7 Will Not Discharge
Some debts simply do not go away in bankruptcy. The big ones are:
- IRS and state tax debt (most of it)
- Domestic support obligations — child support and alimony arrears
- Student loans, in most cases
- Certain court judgments and government fines
If you file Chapter 7 with significant IRS debt or back child support, here is what happens: your credit cards go away, and then you are immediately back to paying those non-dischargeable debts on the outside, with interest and penalties continuing to pile up.
Chapter 13 changes that picture completely. Inside a Chapter 13 plan, you can pay these debts down over three to five years, often without additional interest accruing. At the end of the case you get something that Chapter 7 simply cannot give you in this situation: a true fresh start, not just the elimination of unsecured debt.
There is a particularly useful wrinkle with student loans. Your loans go into forbearance during the Chapter 13. And if you are enrolled in an income-driven repayment program, you generally get credit toward forgiveness for the time you are in your Chapter 13 plan — even though you are not making payments on the loan itself. This is one of the most overlooked benefits of Chapter 13, and it is a real one.
3. You Have Assets You Want to Protect
In Chapter 7, the trustee can sell anything you cannot fully exempt. Nevada exemptions are generous — our homestead exemption is one of the most protective in the country — but they have limits. The vehicle exemption, for example, is currently around $15,000 in equity in one vehicle.
Here is what that looks like in practice. Say you own two paid-off vehicles. In a Chapter 7, you would have to surrender one of them to the trustee. In a Chapter 13, you keep both. You pay the equivalent value to the trustee over the life of the plan, spread out over thirty-six to sixty months.
I recommend Chapter 13 over Chapter 7 in situations like this when the asset has real sentimental value, or when keeping the asset now matters more than the payments later. And there is a strategic angle most people miss: that liquidation value you pay in over the plan can be applied to priority debt — like back taxes, child support, alimony. You may end up keeping the asset and using the same dollars to wipe out a debt that would have survived a Chapter 7 anyway.
4. Older Vehicles and Secured Debt
Chapter 13 includes tools to reduce what you owe on certain secured debts — sometimes the principal balance, sometimes the interest rate, sometimes both. The mechanics depend on the type of collateral and how long you have had the loan, and not every loan qualifies. But for the right vehicle loan, Chapter 13 can meaningfully reduce what you actually pay over the life of the plan. This is a conversation worth having with an attorney before you decide between chapters.
Where Chapter 7 Is the Right Call
Chapter 7 is faster, cheaper, and cleaner — when it fits. It typically fits when:
- Your debts are mostly unsecured (credit cards, medical bills, personal loans)
- You are current on your mortgage and car payments, or you do not mind surrendering them
- Your assets fit comfortably within Nevada exemptions
- You do not have significant non-dischargeable debt
- Your income is below the Nevada median, or you otherwise pass the means test
If that describes you, Chapter 7 will likely give you the fastest, most efficient reset.
And here is something most people do not know: you can sometimes qualify for Chapter 7 even when your income looks too high. The means test has exceptions. I will cover those in a separate article, but the two big ones are debts that came largely from a failed business, and certain qualifying disabled veterans whose debts were incurred during active duty. If you have been told you do not qualify for Chapter 7 because of your income, get a second opinion.
What Life Actually Looks Like in Each Chapter
Living in a Chapter 13
Three to five years is a long time, and I will not pretend otherwise. Life keeps happening during a Chapter 13. People lose jobs. Vehicles break down. Medical bills appear out of nowhere.
Here is the thing most people do not know: the Chapter 13 plan is not carved in stone. We have a tool called plan modification that lets us go back to the bankruptcy court and adjust your monthly payment to an amount you can actually afford when circumstances change. I have seen modified plans for individuals who lost jobs, took pay cuts, had babies, and had medical emergencies. The plan is designed to flex with your life.
You can also still purchase a car or a home during a Chapter 13. You just need the court’s approval first. This is one place where my trustee background really pays off — I know what the trustee and the judge are going to look for when they review the request, and I can structure the proposal to give it the best chance of approval.
Life After a Chapter 7
Chapter 7 wraps up quickly. Most clients have their discharge within four to six months, and the budgetary relief is immediate — the credit cards stop, the collection calls stop, the wage garnishments stop.
The one thing people do not always expect: after Chapter 7, you typically need to wait roughly two years before you can qualify for a new mortgage. In Chapter 13, that timeline can actually be shorter — you can often get court approval to buy a home after about a year of consistent plan payments. That is counterintuitive. Most people assume Chapter 13 delays homeownership; in some cases it accelerates it.
When I Steer Clients Away From Chapter 13
Three to five years is a long time, and not every client should sign up for it. The hardest conversations I have are with people who want to save a home but do not have the income to sustain a plan that does it.
I will be direct: in my trustee work, I have seen too many attorneys park clients in a Chapter 13 they cannot afford in order to try to save a home that ultimately cannot be saved. The plan fails twelve or eighteen months in. The client is out the attorney’s fees, the plan payments, and the house. The only person who really benefits is the lawyer.
That will not happen at Riggs Law Firm. If the numbers do not work, I will tell you. If the asset is not worth what you would have to pay to keep it, I will tell you that too. My job is to give you an honest financial assessment — even when the honest answer is “this is not the right tool for your situation.”
Six Questions to Ask Yourself Before You Call
If you sat across from me for a consultation, here are some of the questions I would ask early. Sit with them honestly — your answers will tell you a lot about which direction makes sense:
- What brings you in today? What event or pressure made you finally start thinking about bankruptcy?
- What are you trying to get out of bankruptcy? A clean break? Saving a specific asset? Stopping a foreclosure or garnishment?
- What assets are you trying to protect? A home, a car, retirement, a business?
- Tell me about the home you are trying to save. How far behind are you? What is the property worth? Can you afford the regular payment going forward?
- If the credit card bills went away tomorrow, how would you sleep at night? This question reveals whether the unsecured debt is the real problem or just the loudest symptom.
- What do you want your financial life to look like in five years? Bankruptcy is a tool. The right tool depends on where you are trying to go.
The Honest Truth About Bankruptcy
Bankruptcy is a financial tool. It is not a signal that you failed. People file bankruptcy for all kinds of reasons — medical emergencies, divorces, job losses, failed businesses, identity theft, predatory lending — and almost none of them deserve the stigma our culture attaches to it.
What I see far more often than “too aggressive” filings are people who waited too long. They drained 401(k)s that the law would have protected. They borrowed against home equity that bankruptcy could have preserved. They borrowed from family members and damaged relationships that mattered more than the debt. None of that solved the underlying problem. It just made the eventual filing more painful and the recovery longer.
A successful Chapter 7 gives you immediate budgetary relief and puts you on a path to homeownership and stable credit faster than struggling on your own ever would. A successful Chapter 13 eliminates most or all of your financial problems and sets you on a course for real financial freedom — the kind where you can actually start building wealth instead of paying interest on yesterday’s emergencies.
Whichever chapter is right for you, you are building a better financial future. That is the whole point.
Talk to Riggs Law Firm
If you are weighing Chapter 7 against Chapter 13 — or wondering whether bankruptcy is the right move at all — the most valuable thing you can do is sit down with an attorney who will give you a frank, honest assessment of your options.
At Riggs Law Firm, I bring more than fifteen years of bankruptcy experience to every case, including extensive work representing a Chapter 13 bankruptcy trustee. That background means I see your case from both sides of the table before we ever file.
Call the Riggs Law Firm at 702-605-5070 to schedule a consultation. We will lay out your options, answer your questions, and help you decide what fits your life.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship with Riggs Law Firm. Every bankruptcy case is fact-specific. For advice about your particular situation, please contact a licensed Nevada bankruptcy attorney. Riggs Law Firm is a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.
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