Filing for bankruptcy is a responsible way to manage your debts while still maintaining your ability to work and earn money. Chapter 7 and Chapter 13 are among the most common bankruptcy filings. While similar, both have significant differences that will help determine what plan is better for you.

What is the Difference Between Chapter 7 or Chapter 13 Bankruptcy?

Why Should I File for Chapter 7?

Often referred to as “liquidation bankruptcy,” Chapter 7 is a common filing for individuals or businesses due to its haste. On average, the typical Chapter 7 process lasts between three and six months, letting you start fresh sooner.

Eligibility is based on income. In this case, you must have little to no current income. If your current monthly household income falls below the Arkansas median for households of the same size, you will be able to file for Chapter 7 successfully.

When the filing goes into effect, most of your property (typically, house and car, but other possessions are included as well) is sold to pay off your debts, with another portion of the debt forgiven. Liquidation may not cover the entire sum of the debt, but it will go far in alleviating it.

How is Chapter 13 Different?

Chapter 13 bankruptcy is focused on reorganization rather than liquidation. The Chapter 13 process is longer—about three to five years. In that time, you must repay your debt according to an agreement reached with your creditors and the court (this may include part or all of the original debt).

Eligibility is based on several factors. First, you must be currently employed and have some disposable income (though you are protected from wage garnishment). Your total unsecured debts (credit cards, student loans, medical bills, and child support) must be below $394,725. Your total secured debt (property and vehicles) must be below $1,257,850.

Most people choose Chapter 13 due to the protections it provides those in debt. Once a repayment plan is established, creditors will be unable to seize any of your assets or property.

If you have bankruptcy questions, contact the Bueker Law Firm. Specializing in Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases, their professional attorneys have provided compassionate solutions to people in Stuttgart and throughout Arkansas for nearly 20 years. The Bueker Law Firm gives personalized, one-on-one attention for their clients. Schedule a free consultation at (870) 673-1313 or visit their website for more information on their services.