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Filing for bankruptcy can feel like a daunting process, especially when you’re already dealing with the emotional and financial weight of debt. One of the most critical decisions you’ll make is whether to file for Chapter 7 or Chapter 13 bankruptcy. Both options can provide relief, but the right choice depends on your unique situation. In this guide, we’ll walk you through the key differences between Chapter 7 and Chapter 13 bankruptcy so you can make an informed decision.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is designed to wipe out most unsecured debts, such as credit card balances, medical bills, and payday loans. It offers a fresh financial start by discharging your eligible debts, usually within 3 to 6 months.
Who qualifies for Chapter 7?
To be eligible, you’ll need to pass a means test, which compares your income to the median income for a household of your size in Kentucky. If your income is too high, you might not qualify for Chapter 7 and may need to explore Chapter 13 instead.
How does Chapter 7 work?
A trustee may sell some of your non-exempt assets (if any) to repay creditors, though most filers keep their essentials—like clothing, household goods, and often their primary residence and car, depending on state exemptions.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” is ideal for individuals who want to pay off some or all of their debts over time without losing their property. Instead of immediate debt discharge, Chapter 13 involves a court-approved repayment plan that lasts 3 to 5 years.
Why choose Chapter 13?
- You can catch up on missed mortgage or car payments, potentially saving your home from foreclosure or your vehicle from repossession.
- It’s a good option if you have a steady income but need time to restructure your payments.
Chapter 13 is often recommended for people whose income is too high for Chapter 7 or for those with valuable assets they want to protect.
How to Decide: Questions to Ask Yourself
Both Chapter 7 and Chapter 13 offer powerful tools to deal with debt, but your situation will determine which one is best for you. Ask yourself:
- Am I trying to stop a foreclosure or repossession?
- If you’re behind on mortgage or car payments, Chapter 13 can help you catch up and keep your property.
- Do I have little disposable income after paying essential expenses?
- If so, Chapter 7 may be the right option, since it eliminates unsecured debts more quickly.
- What kind of debt do I have?
- Credit card debt, medical bills, or personal loans? Chapter 7 might be more effective.
- Tax debt, student loans, or child support obligations? Chapter 13 might offer more flexibility to pay over time.
- Do I have significant assets I want to protect?
- If you have property that might not be exempt in Chapter 7, filing for Chapter 13 could be a safer route.
The Role of a Bankruptcy Attorney in Making the Right Choice
Deciding between Chapter 7 and Chapter 13 can feel overwhelming, especially when you’re unsure about the long-term consequences. This is where a knowledgeable bankruptcy attorney can make all the difference.
At Dennery Law, we’ve helped hundreds of Central Kentucky residents navigate bankruptcy and find the best solution for their financial situation. We walk you through every step of the process—from determining which chapter is best to ensuring your paperwork is complete and accurate. With our guidance, you’ll feel empowered and in control of your financial future.
What Happens After Filing for Bankruptcy?
No matter which type of bankruptcy you choose, life doesn’t stop after you file. In fact, bankruptcy can be the beginning of a new financial chapter.
- Rebuilding Your Credit: It’s possible to rebuild your credit after bankruptcy. Many people find that their credit scores start improving within a year, especially if they make timely payments on any remaining debts.
- Access to Financial Resources: After filing, there are numerous tools and programs available—such as secured credit cards, budgeting apps, and financial counseling—that can help you regain your financial footing.
At Dennery Law, we also provide post-bankruptcy resources to guide you toward better financial health.
Let Us Help You Take the Next Step
Bankruptcy isn’t the end—it’s a new beginning. Whether you choose Chapter 7 or Chapter 13, Dennery Law is here to support you through the process. Our experienced attorneys understand the complexities of bankruptcy law and will work with you to develop a strategy tailored to your specific needs.
When you’re ready to regain control of your finances, schedule a free consultation with Dennery Law. We’ll help you explore your options and create a plan to move forward. Relief is closer than you think.
Contact Us Today
At Dennery Law, we proudly serve the Central Kentucky community. Call us or visit our website to get started. Don’t let debt control your life—let us help you take the first step toward a brighter financial future.
This blog post combines practical information with a personal, encouraging tone, addressing the most common concerns while also positioning Dennery Law as a compassionate and experienced legal partner.