Chapter 7 or 13 Bankruptcy: Which Is Right for You?

Financial difficulties can be overwhelming, leaving you feeling trapped and uncertain about the future. If you’re facing unmanageable debt, bankruptcy may provide the relief you need to regain control of your finances. At Boudreaux Law Firm in Augusta, GA, we understand that filing for bankruptcy is a significant decision. That’s why we’re here to help you determine which type of bankruptcy—Chapter 7 or Chapter 13—is the right option for your unique situation.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals who cannot repay their debts. In a Chapter 7 case, non-exempt assets may be sold to pay off creditors, but many people who file do not lose any property due to state exemptions that protect essential assets.

One of the main benefits of Chapter 7 bankruptcy is that it discharges most unsecured debts, such as credit card debt, medical bills, and personal loans. This means that once the bankruptcy process is complete, you are no longer legally obligated to repay those debts. The entire process typically takes about three to six months.

Chapter 7 is often the preferred option for those with limited income and few assets. According to the American Bankruptcy Institute, approximately 63% of all consumer bankruptcy filings in 2022 were under Chapter 7, reflecting its popularity among individuals seeking a fresh financial start.

Understanding Chapter 13 Bankruptcy

Chapter 13 bankruptcy, known as “reorganization bankruptcy,” is designed for individuals who have a regular income and want to keep their assets while repaying their debts. In a Chapter 13 case, you create a repayment plan that lasts three to five years, during which you make monthly payments to a bankruptcy trustee who distributes the funds to your creditors.

Unlike Chapter 7, Chapter 13 allows you to keep your home, car, and other significant assets, provided you stay current on your repayment plan. This option is ideal for individuals who are behind on their mortgage or car payments and want to avoid foreclosure or repossession.

Chapter 13 is often chosen by individuals with a stable income who need time to catch up on missed payments. The American Bankruptcy Institute reported that Chapter 13 filings accounted for approximately 37% of consumer bankruptcy cases in 2022.

Which Option Is Right for You?

Choosing between Chapter 7 and Chapter 13 bankruptcy depends on your specific financial situation, income, and goals. Here are some factors to consider:

• Income Level: If your income is below the median for your state, Chapter 7 may be the best option. If you have a higher income, Chapter 13 may be more appropriate.
• Asset Retention: If you want to keep significant assets like your home or car, Chapter 13 may be a better choice. Chapter 7 may require the sale of non-exempt assets.
• Type of Debt: Chapter 7 discharges most unsecured debts, while Chapter 13 allows for the repayment and possible discharge of more complex debts.
• Long-Term Impact: Chapter 7 provides a quicker discharge, but Chapter 13 may be better for long-term financial management and rebuilding credit.

How Boudreaux Law Firm Can Help

Navigating bankruptcy law can be complicated, but you don’t have to go through it alone. At Boudreaux Law Firm in Augusta, GA, we have extensive experience guiding clients through both Chapter 7 and Chapter 13 bankruptcies. We’ll work closely with you to understand your financial situation and help you choose the best option for achieving debt relief.

Filing for bankruptcy is a significant decision that requires careful consideration of your financial circumstances and goals. Whether Chapter 7 or Chapter 13 is right for you, Boudreaux Law Firm is here to help you make an informed choice and guide you through the process. Contact us today to schedule a consultation and take the first step toward financial freedom.