Chapter 7 Versus 13: Which Is Right For You?

Bankruptcy is a confusing area of law. One of the first decisions you will have to make in pursuing bankruptcy is which type to file — Chapter 7 or Chapter 13. These two processes are very different. However, they both have the same goal: getting you out of debt and providing a clean financial slate.

Many considerations go into deciding which type to file. Your unique financial profile — that is, your income, assets and debts — will play a big role in guiding your decision. Key questions include:

  • Do you qualify for Chapter 7? To be eligible for Chapter 7, you must meet a means test showing your income and assets are below a certain threshold. If your income or assets are too high, Chapter 13 might be your only option.
  • What kind of debts do you have? For some debts, it may make more sense to file Chapter 13. This process can give you the ability to reorganize secured debts. If you are behind on mortgage payments, for example, Chapter 13 will help you catch up. Likewise, if you have a second mortgage and your home is underwater, you may be able to get rid of it through Chapter 13.
  • How quickly do you want your debts gone? Chapter 7 is a far faster process; you can typically have your debts erased after about four months. Chapter 13, by contrast, involves a three- to five-year repayment plan. Your eligible debts will be wiped away at the end of that repayment period.
  • How much money do you want to put down? Bankruptcy involves filing costs, court fees and other expenses. In Chapter 13 bankruptcy, you can roll these costs into your payment plan, meaning you generally won't have to put any money down toward attorney fees. For Chapter 7, however, you will have to tackle these costs upfront. They generally range between $1,500 and $2,500.

Discuss Your Situation With A Bankruptcy Lawyer

Filing bankruptcy is a big decision. At Wootton & Wootton, P.C., one of our bankruptcy attorneys can sit down with you and make sure you understand your options. Our goal is to help you feel comfortable and confident on the road toward becoming debt free.

To arrange a free initial consultation at one of our offices in Durham or Henderson, North Carolina, please call 919-794-8660.