Which Type of Bankruptcy Is Right for Me?
The Fresh Start
Designed to eliminate
The Reorganization Plan
A powerful option for debtors who don't qualify for Chapter 7, have assets at risk, or are facing foreclosure or repossession.
If you're unsure which chapter best fits your situation, a consultation with our experienced bankruptcy attorney can clarify your options.
Chapter 7 Bankruptcy: The Fresh Start
Chapter 7 is often called the "Fresh Start" bankruptcy because it wipes out most unsecured debt, including credit cards, medical bills, and personal loans. While some articles suggest that the Chapter 7 trustee sells off the debtor's assets, that's rarely the case.
A skilled bankruptcy lawyer will review your financial situation and apply exemptions to protect as much of your property as possible before filing. In most cases, nothing is sold, and clients keep their assets while eliminating burdensome debt.
However, not all debts are dischargeable:
- Child support, alimony, and other domestic support obligations are never discharged.
- Student loans and some types of tax debt may also survive Chapter 7.
Fast Relief — Often in 3–6 Months
Chapter 7 is the fastest form of bankruptcy protection available. Most cases are complete in 3 to 6 months, providing swift relief from collection calls, lawsuits, and wage garnishments.
Mortgages, Car Loans, and Chapter 7
Mortgages and car loans are secured debts tied to specific property. While Chapter 7 can temporarily stop foreclosure or repossession, that relief is usually short-term.
If you want to keep your home or car, Chapter 7 may not be the best long-term solution. For many, Chapter 7's greatest benefit is eliminating unsecured debt quickly — often in just a few months — so you can move forward debt-free.
Chapter 13 Bankruptcy: The Reorganization Plan
Chapter 13 bankruptcy — sometimes called the "wage earner's plan" — allows individuals with regular income to restructure their debt under court supervision. A plan typically lasts three to five years, and many clients pay back only a portion of their unsecured debts, with the rest discharged at the end.
This chapter is particularly helpful for people who:
- Are behind on mortgage payments
- Want to stop foreclosure or repossession
- Need time to catch up on secured debt
- Have nonexempt property they wish to protect
Mortgages, Car Loans, and Chapter 13
Chapter 13 offers powerful protection against foreclosure and repossession. Once your case is filed, an automatic stay goes into effect, immediately stopping all collection actions — including foreclosure sales and repossessions.
Your missed mortgage payments can be included in your repayment plan, giving you up to five years to catch up. Vehicle loans can often be restructured with lower interest rates or reduced balances, making Chapter 13 an excellent tool for anyone seeking to keep their home, car, and peace of mind.
Side-by-Side Comparison
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Who qualifies | Must pass the means test | Regular income; no means test |
| Duration | 3 – 6 months | 3 – 5 years |
| Unsecured debt | Most discharged entirely | Partial repayment, rest discharged |
| Home / mortgage | Short-term relief only | Catch up arrears; stop foreclosure |
| Car / auto loan | Short-term relief only | Restructure or cram down |
| Asset protection | Exemptions; liquidation possible | Stronger protection |
| Tax debts | Some dischargeable | Can repay through plan |
| Credit report | 10 years | 7 years |
| Best for | Quick fresh start, low income | Saving home, regular income |
Bankruptcy and Credit
Both Chapter 7 and Chapter 13 have a significant impact on your credit score. Chapter 7 typically stays on your credit report for 10 years, while Chapter 13 remains for 7 years from the filing date.
Chapter 7 can cause a sharper immediate drop since debts are discharged quickly, whereas Chapter 13 shows creditors you are actively repaying debts. The good news: you can start rebuilding your credit as soon as your bankruptcy case is complete — and it's often easier to rebuild when your report no longer includes negative collection accounts or judgments.
Fresh Financial Start
Once your bankruptcy is complete, you can start rebuilding credit immediately — and it's often easier when old negative accounts are removed, giving you a clean slate.
Benefits & Downsides of Chapter 7
Benefits
- Wipes out most unsecured debt completely
- Fast — often complete in 3–6 months
- Eliminates creditor calls, lawsuits & garnishments
- No long-term repayment commitment
- Provides a true financial fresh start
Downsides
- Does not fully protect nonexempt assets
- Child support, alimony, student loans not discharged
- Stays on credit report for 10 years
- Short-term relief only for secured debt
- Must pass the means test to qualify
The biggest benefit of Chapter 7 is that it can wipe out most unsecured debt — relieving the stress of collection calls, lawsuits, wage garnishments, and liens. In most cases, clients keep their assets while eliminating burdensome debt.
Benefits & Downsides of Chapter 13
Benefits
- Stops foreclosures, garnishments & repossessions
- Lets you keep your home and catch up on arrears
- Restructure or reduce car loan balances
- Manage or eliminate certain tax debts
- Attorney fees can be included in monthly plan
- Only 7 years on credit report (vs 10 for Ch. 7)
Downsides
- Long commitment: 3–5 year repayment plan
- Regular monthly payments required throughout
- More complex than Chapter 7
- Requires steady, regular income to qualify
Chapter 13 offers powerful protections for your property. It can stop foreclosures, wage garnishments, and vehicle repossessions. In many cases, attorney's fees can be included in the monthly payment plan, making Chapter 13 a surprisingly affordable solution for regaining financial stability.
