If you’re struggling with overwhelming debt, bankruptcy may offer a path to relief—but choosing the right type of bankruptcy is a critical decision. Many people assume Chapter 7 is the better option because it’s faster and often involves a full discharge of debt. But for some individuals and families, Chapter 13 bankruptcy provides more long-term protection and flexibility.
At Law Offices of Terrence Fantauzzi, we help Southern California residents determine which chapter best fits their financial situation and goals. In this blog, we’ll explore why Chapter 13 may be the better option for some filers—especially those with valuable assets or a regular income.
Understanding the Basics of Chapter 7 and Chapter 13
Chapter 7 is known as “liquidation” bankruptcy. It allows you to discharge most unsecured debts, such as credit cards and medical bills, in as little as three to six months. However, in exchange, a court-appointed trustee may sell off your nonexempt assets to repay creditors.
Chapter 13, on the other hand, is a “reorganization” bankruptcy. Instead of selling assets, you propose a 3- to 5-year repayment plan based on your income, expenses, and the type of debt you owe. Once the plan is successfully completed, any remaining eligible debts may be discharged.
Why Choose Chapter 13 Over Chapter 7?
While Chapter 7 offers a faster discharge process, Chapter 13 may be a better choice in the following situations:
You Have Nonexempt Assets You Want to Keep
If you own property that would be subject to liquidation in Chapter 7—such as a second car, investment property, or other valuable assets—Chapter 13 allows you to keep them while repaying some or all of your debt over time.
You’ve Fallen Behind on Your Mortgage or Car Loan
Chapter 13 gives you the opportunity to catch up on past-due payments over the life of your repayment plan, helping you avoid foreclosure or repossession. Chapter 7 does not offer this kind of long-term relief for secured debts.
You Have Significant Tax or Domestic Support Obligations
Certain debts like recent tax liabilities and child support are not dischargeable in Chapter 7. Chapter 13 allows you to repay these priority debts over time without the threat of wage garnishment or other collection efforts.
You Don’t Qualify for Chapter 7
Not everyone is eligible for Chapter 7. If your income exceeds the state median and you don’t pass the means test, you’ll likely need to file under Chapter 13. This is especially common for dual-income households or small business owners.
The Drawbacks to Consider
Chapter 13 isn’t right for everyone. The repayment period can last up to five years, which requires consistent income and financial discipline. If you fail to keep up with the plan, your case could be dismissed or converted. Additionally, not all debts are dischargeable at the end of the plan.
That’s why it’s essential to work with a bankruptcy attorney who can help you evaluate your budget, obligations, and goals before committing to a filing strategy.
Work With a Bankruptcy Attorney Who Understands Both Options
Choosing between Chapter 7 and Chapter 13 isn’t just about speed—it’s about protecting what matters most and setting yourself up for future financial success. An experienced attorney can review your situation, explain how the bankruptcy code applies to you, and walk you through every step of the filing process.
At Law Offices of Terrence Fantauzzi, we’ve helped countless clients throughout Southern California get the debt relief they need without sacrificing their long-term stability.
Call Law Offices of Terrence Fantauzzi at (909) 552-1238 for a Free Bankruptcy Consultation
If you’re considering bankruptcy but aren’t sure whether Chapter 13 or Chapter 7 is right for you, contact Law Offices of Terrence Fantauzzi at (909) 552-1238. We’ll help you weigh your options and find the best path forward to financial freedom.
