If you’re drowning in debt and looking for a way out, bankruptcy may be the fresh start you need. But once you begin exploring your options, you’ll quickly run into one of the most important questions in the process: Should you file Chapter 7 or Chapter 13?
At The Law Offices of Paul Y. Lee, we hear this question all the time—and the answer isn’t one-size-fits-all. Both types of bankruptcy offer powerful protections and relief, but they apply to different financial situations and goals. Knowing the difference between Chapter 7 and Chapter 13 is the first step toward reclaiming control of your financial future.
Let’s break down how each option works and help you start thinking about which path might be best for you.
Chapter 7: Quick Relief and Debt Discharge
Often called “liquidation bankruptcy,” Chapter 7 is designed to wipe out most unsecured debts quickly—usually within a few months. That includes credit card debt, medical bills, personal loans, and more.
Who It’s Best For:
- Individuals with limited income and few assets
- Those overwhelmed by unsecured debt
- People who need fast, total relief
Key Benefits:
- Immediate protection through an automatic stay that stops creditor harassment, lawsuits, garnishments, and foreclosures
- Discharge of most unsecured debts within 3–6 months
- You may be able to keep your car and home if you’re current on payments and exemptions apply
What to Watch Out For:
- You may have to surrender non-exempt assets
- You must qualify through the Means Test, which compares your income to California’s median
- Doesn’t stop foreclosure long-term unless you’re current or catch up
Chapter 13: Structured Repayment With Asset Protection
Unlike Chapter 7, Chapter 13 is a reorganization plan that lets you repay part or all of your debt over three to five years under court supervision. It’s designed for people who earn a regular income but need help catching up or protecting valuable property.
Who It’s Best For:
- Homeowners trying to stop foreclosure
- Individuals with steady income who don’t qualify for Chapter 7
- Those with valuable non-exempt assets they want to keep
Key Benefits:
- Stops foreclosure, repossession, and garnishments
- Lets you catch up on mortgage or car payments
- May allow you to reduce or discharge unsecured debt after the repayment period
- Protects property that might be lost in Chapter 7
What to Watch Out For:
- You’ll need to commit to a monthly payment plan for 3–5 years
- Requires strict budgeting and court approval
- May not discharge all debts until the plan is complete
Choosing Between Chapter 7 and 13: What Really Matters
Here are some key factors that can help determine which type of bankruptcy you should file:
- Your income level – If your income is below the state median, you may automatically qualify for Chapter 7. If it’s above, you’ll likely need to file Chapter 13 unless you pass the Means Test.
- Your assets – If you have equity in a home, car, or other property that exceeds California exemption limits, Chapter 13 may offer more protection.
- Your goals – If you’re trying to save your home, cure arrears, or avoid asset liquidation, Chapter 13 is more strategic. If you’re aiming for fast debt discharge and qualify, Chapter 7 may be more effective.
Still Not Sure? That’s What We’re Here For
Bankruptcy laws are complex, and the wrong decision can cost you time, money, and peace of mind. At The Law Offices of Paul Y. Lee, we offer free, no-pressure consultations to evaluate your situation and explain your options clearly. We’ll help you determine if Chapter 7, Chapter 13—or no bankruptcy at all—is your best path forward.
Let us take the guesswork out of the process and give you honest, personalized guidance.
Call 951-755-1000 today to speak with an experienced California bankruptcy attorney and take the first step toward lasting financial relief.
