Chapter 7 vs. Chapter 13 Bankruptcy: Which Option Is Right for You?
When debt becomes overwhelming, bankruptcy can offer a fresh financial start. In Florida, individuals typically choose between Chapter 7 and Chapter 13 bankruptcy. Understanding the differences helps you make an informed decision about which path is right for you.
Chapter 7 Bankruptcy: Liquidation
Chapter 7, also known as liquidation bankruptcy, allows you to discharge most unsecured debts like credit card balances and medical bills. Here's how it works:
Eligibility: You must pass a means test that evaluates your income and expenses.
Process: Nonexempt assets (secondary real estate, collectibles, etc.) are sold to repay creditors, and remaining eligible debt is discharged.
Timeline: Typically completed in 3-6 months.
Best for: Individuals who cannot afford monthly debt payments and have limited assets to protect.
What debts can be discharged? Credit card debt, medical bills, personal loans, and certain other unsecured debts. However, student loans, child support, and most tax debts cannot be eliminated.
Chapter 13 Bankruptcy: Debt Reorganization
Chapter 13 allows you to keep your assets while repaying debts through a court-approved payment plan over 3-5 years. Key features include:
Eligibility: You must have regular income and meet debt limits (secured debts under $1,395,875; unsecured debts under $465,275).
Process: Consolidate debts into manageable monthly payments; remaining eligible debt is discharged after plan completion.
Timeline: 3-5 years.
Best for: Individuals who want to keep their home, car, or other valuable assets and can afford structured payments.
Which Option Is Right for You?
Choose Chapter 7 if you need immediate debt relief and don't have significant assets to protect.
Choose Chapter 13 if you're facing foreclosure, want to keep your property, and have steady income to make monthly payments.
Both options can impact your credit, but they also provide a path to financial recovery and stability.
If you're struggling with debt in Miami, contact De Armas & Arriete, PLLC, at (786) 454-9838 for a free consultation. We'll help you evaluate your options and guide you toward a fresh financial start.
