Chapter 7 vs. Chapter 13 Bankruptcy: Which One Can Wipe Out Your Debt?
It’s all too easy to get overwhelmed by debt. Leaning on a credit card for the occasional emergency can turn into relying on your card for daily purchases when funds are tight or hours get cut at work. A single medical emergency that insurance refuses to cover can put a family in tens or hundreds of thousands of dollars of medical debt. When your debt is so significant that it overshadows every part of your life, it’s time to look into options—not just for your financial wellbeing, but your mental health as well. Bankruptcy may be the next step for you.
The Victorville bankruptcy attorneys at Ewaniszyk Law Firm have helped many clients just like you get the support they need as they pave the way for a brighter financial future. Whether you ultimately decide on Chapter 7 or Chapter 13, we’ll be with you every step of the way. Schedule a consultation now by calling us at 760-245-7310.
What Chapter 7 Does
Chapter 7 essentially liquidates your debt. When you file bankruptcy, you present a comprehensive list of your secured and unsecured debts, as well as information on your assets and income sources. Non-exempt assets are sold and put towards your debt, and all remaining debt is wiped out. It’s important to note, though, that getting rid of secured debt doesn’t mean eradicating the lien on the attached asset.
Overall, Chapter 7 is a fast process—generally about six months from start to finish, especially when you have a bankruptcy law firm assisting you through the process. When it’s over and your bankruptcy is granted, all qualifying debts are discharged.
How Chapter 13 Manages Your Debt
Chapter 13 takes a dramatically different approach to debt. Instead of clearing it out in one fell swoop, it restructures it. Your secured debts are prioritized, which allows you to keep the assets they finance. Over a period of three to five years, you catch up on secured debts and may begin making progress on unsecured debts. You create a repayment plan with the assistance of your bankruptcy lawyer. Any unsecured debt remaining at the end of your payoff period is discharged.
While you may get a substantial amount of unsecured debt wiped away in Chapter 13 bankruptcy, it comes after three to five years of monthly payments. It is not nearly as quick as Chapter 7. However, if Chapter 7 bankruptcy would mean losing secured assets like your home or vehicles, you may opt for Chapter 13.
Finding the Right Choice for You With a Bankruptcy Attorney
One of the key differences between Chapter 7 and Chapter 13 is how you qualify. Even if Chapter 7 is the option that appeals to you more, it may not be an option for you if your income is above the state median and a means test shows that you do not qualify for Chapter 7 bankruptcy. For individuals and couples whose income exceeds Chapter 7 limits, Chapter 13 may still offer some relief.
Which One Wipes Out More Debt?
As a general rule, Chapter 7 bankruptcy wipes out more debt than Chapter 13. Chapter 13 bankruptcy may result in some or all of your unsecured debt being discharged, but many filers end up making at least some payments to their unsecured debt. Furthermore, you have to consider the amount of time involved—when people think of their debt being wiped out, they tend to think of it as a quick, one-time process. While that does describe Chapter 7 bankruptcy, it definitely doesn’t apply to Chapter 13 filings.
This doesn’t mean that Chapter 7 is always the best choice. In fact, for many people, Chapter 13 is the better option. Before you get too committed to one form of bankruptcy or the other, it’s best to set up a consultation at a bankruptcy law firm to learn more about your options and how they will affect your assets and financial wellbeing.
Explore Your Options With Ewaniszyk Law Firm
If you’re ready to talk about your next steps with a bankruptcy lawyer, the team at Ewaniszyk Law Firm is here to support you through the process. Set up a time to talk by filling out our confidential online contact form or calling us at 760-245-7310.
Mr. Ewaniszyk was first admitted to practice law in 1982 and he lived and raised his family in the High Desert since 1986. He has successfully represented hundreds of clients each year suffering from serious and catastrophic personal injuries, those accused of criminal offenses, people going through divorce and family law matters, and families facing bankruptcy. Mr. Ewaniszyk has tried many cases in both Federal and State Courts during his extensive career and previously served for five years as the City Attorney for the City of Adelanto. Learn more here.