Understanding the Differences Between Chapter 7 and Chapter 13 Bankruptcy

Bankruptcy 15If your debt is unmanageable and you’re finding it increasingly difficult to keep up with monthly payments, you may be considering the benefits and drawbacks of bankruptcy. As a consumer, you have two options that may be available to you: Chapter 7 and Chapter 13 bankruptcy. In this blog, we will highlight the differences between these two options.


You must meet strict standards to qualify for Chapter 7 bankruptcy. The court will look at how much debt you have, what your monthly payments are, your income, and how much disposable income you have. You must have relatively little disposable income to qualify for Chapter 7. Those with too much disposable income may be able to reorganize their debt through Chapter 13 bankruptcy.

How Much You’ll Repay

Those who file a Chapter 7 bankruptcy will have to sell their nonexempt property to make payments to creditors. However, it’s important to note that the majority of people filing Chapter 7 bankruptcy in Texas do not have any nonexempt assets. As a result, many people do not repay any debt that is dischargeable in a Chapter 7 bankruptcy. Chapter 13 reorganizes your debt and you will have to pay some or all of your unsecured debt, rather than discharging it all.

How Your Assets Will Be Affected

Those filing bankruptcy have to list and evaluate their assets. Most assets are exempt from seizure. Anything nonexempt is sold and used to repay creditors. Assets are divided into categories, such as vehicles, retirement accounts, jewelry, and personal property. A certain amount is exempt in each category. If you have secured debt, such as a car loan or mortgage, you will get to decide if you want to keep or surrender these assets. Chapter 13 filers get to keep their assets. In exchange, they must repay the value of their nonexempt assets to creditors.

The Length of the Process

Chapter 7 bankruptcy is a fairly short, straightforward process. From filing to getting your discharge, it typically lasts four to five months. Chapter 13 is substantially longer. Depending on the amount of debt you have and the payment structure decided upon by your trustee, you may make payments for three to five years before the remaining debt is discharged.

How It Impacts Your Credit

Whether you choose Chapter 7 or Chapter 13 bankruptcy, your credit will be affected. Chapter 13 bankruptcy stays on your credit report for up to seven years, while a Chapter 7 discharge remains on your report for up to 10 years. Either way, you can begin rebuilding your credit immediately with a solid plan and careful utilization of resources. We help you prepare for success by offering access to 7 Steps to a 720 Credit Score for FREE to all our clients. This program, valued at $1,000, helps you rebuild your credit score in just 12 to 24 months.

Is bankruptcy the best option for your financial future? To discuss your options and make a plan, contact Ciment Law Firm, PLLC to schedule a consultation now.

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