Chapter 7 Vs. Chapter 13 Bankruptcy: Understanding The Differences

Bankruptcy terminology is notoriously confusing. Two of the most common types of consumer bankruptcy are Chapter 7 and Chapter 13, which are named for their sections in the federal Bankruptcy Code. While both offer paths to debt relief, they have numerous key differences. It’s crucial to understand these differences and work with a knowledgeable attorney to determine the best option for your unique situation.

I’m Keith Borders, a Cleveland bankruptcy attorney at Borders Law, LLC. With over 20 years of experience, I’ve helped thousands of people navigate the complexities of bankruptcy in Ohio. I offer personalized attention, affordable attorney fees and a commitment to helping you find the right path forward, whether that involves Chapter 7 bankruptcy or Chapter 13.

Key Differences Between Chapter 7 And Chapter 13

Chapter 7 and Chapter 13 bankruptcy serve different purposes and are suited to different financial situations. Here are some major differences:

• Eligibility: Chapter 7 requires passing a “means test” to qualify, while Chapter 13 is available to those with any income.
• Process: Chapter 7 involves liquidating non-exempt assets to pay off debts, often completing within 3-6 months. Chapter 13 involves a 3-5 year repayment plan.
• Asset retention: Chapter 7 may require selling assets if you have any that are nonexempt, whereas Chapter 13 allows you to keep your property while repaying debts.
• Timing of debt discharge: Chapter 7 discharges most unsecured debts within 3-6 months, while Chapter 13 focuses on reorganizing debts with a potential discharge of remaining unsecured debts after plan completion.

This is simply a broad overview of the differences. I can provide a more detailed explanation that is relevant to your situation.

How To Decide Which Type Is Right For You

Choosing between Chapter 7 and Chapter 13 depends on several factors, including:

• Your income level
• Your assets, including home ownership
• The types of debt you have
• Your long-term financial goals

If you’re struggling with unsecured debts, don’t own significant assets and meet the income requirements, Chapter 7 might offer the quickest relief. On the other hand, if you have a steady income and wish to keep your home or car, Chapter 13 could be a better fit. A skilled bankruptcy lawyer such as myself can help you evaluate these factors.

Take The Next Step Toward Debt Relief

If you’re considering bankruptcy, understanding your options is the first step. I can help you explore the differences between Chapter 7 and Chapter 13 bankruptcy and find the right solution for your circumstances.

I offer free consultations to assess your financial situation and provide guidance on the best course of action. We’ll discuss your debts, assets and goals to determine which chapter aligns with your needs. Contact me today at 216-435-5668 to get started.

My firm is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.