When To Choose Chapter 13  Over Chapter 7 Bankruptcy?

 Posted on June 23, 2025 in Bankruptcy

If you have a great deal of debt, bankruptcy can offer a fresh start. But when it comes to choosing whether to file Chapter 7 or Chapter 13 bankruptcy, the decision depends largely on the circumstances of your case, particularly the type of debt you have. The reason for this is that both Chapter 7 and Chapter 13 help people get rid of debt, but they work in very different ways.

Understanding when Chapter 13 might be the better choice is key to protecting your assets and planning for a better financial future. An experienced Wise County, TX bankruptcy attorney can advise you on the most appropriate route for you.

What Is the Difference Between Chapter 13 and Chapter 7 Bankruptcy?

Chapter 7 is often called the "liquidation bankruptcy" because at the end of the process wipes out most unsecured debts (such as credit cards or medical bills), usually within three to five months. However, it may require you to give up certain non-exempt assets to pay creditors.

Chapter 13 is known as a "reorganization bankruptcy." Instead of wiping out your debts immediately, you propose a repayment plan to pay off all or part of your debts over three to five years. You keep your property, and once you finish the plan, remaining eligible debts may be discharged.

When Is Chapter 13 The Better Option?

Avoiding Foreclosure

Chapter 13's biggest advantage is helping you save your home from foreclosure. If you are behind on mortgage payments but have a steady income, Chapter 13 lets you catch up on missed payments over the course of the bankruptcy while the automatic stay stops foreclosure for the duration of the bankruptcy.

Protecting Non-Exempt Assets

Chapter 7 requires you to surrender non-exempt assets to pay creditors. Although Texas has one of the most generous exemptions in the U.S., allowing you to keep your home and often other important assets as well, there are still assets that are not exempt under Chapter 7. Chapter 13 helps you keep these assets. For example, if you own valuable assets that do not qualify for exemptions, such as expensive jewelry, collectibles, or a second vehicle, Chapter 13 lets you keep them by paying their value to creditors through your repayment plan, instead of having the trustee sell them, as they would have to do under Chapter 7.

Dealing with Priority Debts

Chapter 13 excels at handling priority debts that Chapter 7 cannot eliminate. If you owe back taxes, child support, or alimony, Chapter 13 creates a manageable payment plan for these obligations. You can spread these payments over several years rather than facing immediate collection actions.

Call a Wise County, TX Bankruptcy Attorney

If you are considering filing for bankruptcy but are not sure about whether Chapter 13 or Chapter 7 is best, the experienced Arlington, TX bankruptcy attorneys at Acker Warren P.C. can advise you on the right option in your case. Call us at 817-752-9033 for a complimentary consultation.