When most people hear the word bankruptcy, they picture a courtroom drama. But in reality, bankruptcy isn’t about theatrics—it’s about options. Knowing the difference between Chapter 7 and Chapter 13 is the first step in deciding what fits your situation best.
The Basics
Think of Chapter 7 as the financial equivalent of clearing your desk. It’s designed to wipe out many unsecured debts—like credit card balances and medical bills. The trade-off? You might have to part with some assets, depending on your state’s exemption laws. This Chapter is designed for folks with limited income and few assets.
Now flip the page to Chapter 13, and you’ll find a slower, more strategic approach. Instead of erasing your debts immediately, you create a repayment plan that spans 3 to 5 years. But this plan is based on what you can reasonably afford not based upon what some creditor demands that you pay. A Chapter 13 can make sense if you have high income but can’t seem to get over the hump or if you are behind on a house or car and are afraid of losing it.
Still not sure?
Imagine this:
You’ve got a mountain of credit card debt, no big assets, and barely enough to cover rent. Chapter 7 might feel like a breath of fresh air.
On the other hand, maybe you’re earning a steady paycheck but drowning in back payments on your house. You don’t want to lose it—you just need time. That’s where Chapter 13 might shine.
It’s Not a Competition—It’s a Custom Fit
There’s no one-size-fits-all answer here, and there doesn’t need to be. Choosing between Chapter 7 and Chapter 13 is less about which one is better and more about which one fits your case.
We’re not here to scare you into anything. We’re here to help you make sense of what can feel like a very complicated system—and maybe make you smile while you’re at it.
Bankruptcy isn’t a failure—it’s a tool. The chapter you choose is just the beginning of a story where you’re back in control. At Farmer & Wright, we believe that smart choices start with solid information, that’s why you can have a FREE consultation with us to see all your options.
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