Chapter 7 Vs. Chapter 13 Bankruptcy: Which One To File?

4 August 2021
 Categories: , Blog


As you look at your debts and finances, you might decide to do something about the issues you have. Bankruptcy is an option you can turn to when you need help with your financial state, but which branch should you pursue? The main two options are Chapter 7 and Chapter 13, but one option will likely be better for you than the other. Here is a brief description of each branch to help you understand the differences.

Chapter 7 Bankruptcy

Courts often call this branch of bankruptcy the liquidation branch. The reason for this is the way it works. When you use this branch of bankruptcy, you agree to hand over some of your possessions in exchange for a discharge of any qualifying debts you have. Therefore, you liquidate your assets to pay off your debts. Now, there is a chance you will not have to surrender any of your assets. It depends on what you own, and your bankruptcy attorney can tell you more about the effects of this before you file.

The other thing to know about Chapter 7 is that not everyone qualifies for it. You must earn less money than the average earner in your state to be eligible for Chapter 7.  

The final thing to know is that a Chapter 7 case is rather quick. It may take around four to six months to complete your case.

Chapter 13 Bankruptcy

The second option is Chapter 13 bankruptcy. While it might seem like Chapter 7 has more advantages, Chapter 13 is ideal for certain situations. Chapter 13 cases take up to five years to complete, which is much longer than a Chapter 7 case. The good news about Chapter 13 is that you do not have to surrender any assets if you file.

While Chapter 13 does not have the low-income requirement, it has a different type of income requirement. You must prove that you earn enough money to pay off your debts if you want to file for Chapter 13. In a Chapter 13 case, you repay your debts over time through a repayment plan that your attorney sets up.

If you need help deciding whether to file for bankruptcy, talk to an attorney. An attorney can tell you all your options and help you determine the best choice for your situation. You can learn more about bankruptcy by contacting a bankruptcy lawyer in your city.