Chapter 7 and Chapter 13 bankruptcy offer different ways to deal with debt, and the better option depends on your income, assets, and financial priorities. Chapter 7 focuses on eliminating qualifying debts in a relatively short time, while Chapter 13 uses a court-approved repayment plan to help you catch up gradually. When you are facing serious financial pressure in New York, understanding how these two options compare can make it easier to choose a path that fits your situation.
What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
The main difference comes down to how debts are handled and how long the process lasts.
Chapter 7, often called liquidation bankruptcy, is designed to eliminate unsecured debts such as credit cards and medical bills. Chapter 13, sometimes called reorganization bankruptcy, allows you to repay some or all of your debts through a court-approved plan that lasts three to five years.
Each option has its own eligibility rules, benefits, and trade-offs, which is why the right choice looks different from one filer to the next.
How Chapter 7 Bankruptcy Works in New York
Chapter 7 is typically the faster option. Most cases are completed in several months, and many filers do not have to repay unsecured creditors at all.
To qualify, you must pass the means test, which compares your household income to New York’s median income and reviews your expenses. If you qualify, the court appoints a trustee to review your assets.
In many cases, people who file Chapter 7 are able to keep essential property using New York and federal exemptions, which may include:
- A portion of home equity
- One vehicle up to a certain value
- Retirement accounts
- Household goods and personal items
Chapter 7 is often a strong fit if you have limited income, little disposable cash, and debts that you cannot realistically repay.
How Chapter 13 Bankruptcy Works in New York
Chapter 13 takes a different approach. Instead of eliminating debts right away, it creates a repayment plan based on what you can afford each month.
Under Chapter 13, you make regular payments to a trustee, who then distributes funds to creditors. At the end of the plan, any remaining eligible unsecured debt may be discharged.
This option is commonly used by people who:
- Are behind on mortgage or car payments
- Earn too much to qualify for Chapter 7
- Want to protect non-exempt assets
- Need time to catch up on secured debts
Chapter 13 can also stop foreclosure or repossession and give you a structured way to get back on track while keeping your property.
Which Bankruptcy Option Is Better for Your Financial Situation?
There is no single answer that applies to everyone. The better option depends on how your income, debts, and assets work together.
Chapter 7 may make sense if your income is low, your debts are mostly unsecured, and you do not need a long-term repayment plan. Chapter 13 may be the better choice if you have a steady income, valuable assets to protect, or overdue secured debts that you want to keep.
We often help clients compare both options side by side, looking at how each filing would affect their property, monthly budget, and future financial obligations.
How Bankruptcy Affects Credit and Long-Term Finances
Both Chapter 7 and Chapter 13 will impact your credit, but the effect is not permanent. Many people begin rebuilding credit sooner than expected by paying bills on time and managing new accounts responsibly.
Chapter 7 remains on your credit report longer than Chapter 13, while Chapter 13 shows creditors that you followed a court-approved repayment plan. In either case, bankruptcy can remove debts that are holding you back and give you a clearer financial path forward.
When to Talk With a New York Bankruptcy Attorney
Choosing between Chapter 7 and Chapter 13 is a legal decision with long-term consequences. Filing without understanding how exemptions, income limits, and repayment plans apply to your situation can lead to avoidable problems.
When you are facing collection actions, wage garnishment, or mounting bills, getting accurate guidance early can help you avoid missteps and move forward with confidence.
A Clear Path Forward Starts With the Right Bankruptcy Choice
If you are deciding between Chapter 7 and Chapter 13, we will help you understand how each option applies to your finances and what you can expect from the process. At Robert H. Solomon, PC, we work with individuals in New York to identify the bankruptcy solution that fits their goals and protects what matters most. Contact us to schedule a consultation and take the next step toward financial stability.