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Does it Matter if You Choose Chapter 7 vs. Chapter 13 Bankruptcy?

 Posted on May 17, 2024 in Bankruptcy

Schertz Chapter 7 Bankruptcy LawyerWhen facing overwhelming debt, you may consider filing for bankruptcy as a way to gain a fresh financial start. However, figuring out if you should choose a Chapter 7 or Chapter 13 bankruptcy can be daunting. A Texas lawyer can help you determine the differences between these two types of bankruptcy and help you understand why your choice matters.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, is designed to help individuals quickly discharge most of their unsecured debts, such as credit card balances, medical bills, and personal loans. To qualify for Chapter 7 in Texas, you must pass a means test comparing your income to the state’s median income. The process typically takes three to six months to complete if you qualify. Additionally, the process has strengths and weaknesses, including:


  • Allows for a quick discharge of most unsecured debts

  • No repayment plan required

  • Provides immediate relief from creditor harassment


  • Certain assets may be sold to repay creditors

  • Not all debts are eligible for discharge (e.g., student loans, alimony, child support)

  • Can remain on your credit report for up to 10 years

Exploring Chapter 13 Bankruptcy

Chapter 13 bankruptcy, or “reorganization” bankruptcy, involves creating a three to five year repayment plan to pay off a portion of your debts. This type of bankruptcy is often chosen when someone has a steady income but is struggling to keep up with payments. In Texas, Chapter 13 can help protect your assets, such as your home, from foreclosure. The benefits and drawbacks of this option include:


  • Allows you to keep your assets while repaying debts

  • Provides an opportunity to catch up on missed mortgage or car payments

  • Offers protection from creditor harassment and wage garnishment


  • Requires a long-term commitment to a repayment plan

  • May be more expensive due to attorney fees and court costs

  • Can stay on your credit report for up to seven years

Factors to Consider When Choosing Between Chapter 7 and Chapter 13

When you are trying to figure out which bankruptcy route to take. Consider the following for your specific situation: 

  • Income and Expenses: Your current financial situation, including your income and expenses, will play a significant role in determining which type of bankruptcy is right for you.

  • Assets: If you have assets you want to protect, such as a home or car, Chapter 13 may be the better choice.

  • Type of Debt: Some debts, like student loans and child support, cannot be discharged in Chapter 7. If these make up a significant portion of your debt, Chapter 13 may be more appropriate.

  • Credit Impact: Both types of bankruptcy will affect your credit score, but Chapter 7 tends to have a more severe and longer-lasting impact.

Contact a Boerne, TX Bankruptcy Lawyer

Choosing between Chapter 7 and Chapter 13 bankruptcy is a significant decision that can have long-term consequences for your financial future. By determining the differences between the types of bankruptcy and considering factors such as your income, assets, and type of debt, you can make an informed decision that best suits your unique situation. Call Law Offices of Chance M. McGhee at 210-342-3400 for a free consultation with a Kerrville, TX bankruptcy attorney.

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