When debt becomes unbearable, bankruptcy can offer a fresh start. But Chapter 7 and Chapter 13 serve very different purposes, and choosing the wrong one can be costly.
Chapter 7: The "Quick Discharge"
Chapter 7 eliminates most unsecured debts, credit cards, personal loans, medical bills, in about 3 to 6 months.
Pros: Fast, completely eliminates most debts, immediately stops collection calls and lawsuits.
Cons: Must pass a means test. Significant assets may be sold by the trustee. Doesn't eliminate recent tax debts, federal student loans, or child support.
Chapter 13: The "Reorganization Plan"
Chapter 13 sets up a 3 to 5-year repayment plan based on your disposable income. Remaining debt is discharged at the plan's end.
Pros: Keep your home and stop foreclosure. Pay mortgage arrears through the plan. No income limit.
Cons: Longer process, more complex, requires steady income.
Which Is Right for You?
Low income, no significant assets, mostly credit card or medical debt → Chapter 7. Home at risk, stable income, or debts that can't be discharged in Chapter 7 → Chapter 13.
Talk to an Attorney First
The right choice depends on your income, assets, debt types, and long-term goals. At Centro de Acción Legal, we analyze your situation at no cost. Contact us today.