Chapter 7 vs. Chapter 13 Bankruptcy: Which is Right for You?

When people talk about filing for bankruptcy, they're usually referring to one of two options: Chapter 7 or Chapter 13. Both provide powerful debt relief, but they work very differently — and the right choice depends on your income, assets, and goals.

Here's a plain-English breakdown of how each works and who each is best suited for.

Chapter 7: The Fresh Start

Chapter 7 is often called "liquidation bankruptcy," but for most people, that term is misleading. In Florida, the state's generous exemptions — including the unlimited homestead exemption, $1,000 in personal property, $1,000 in vehicle equity, and retirement accounts — mean that most filers keep everything they own.

What Chapter 7 does is discharge (eliminate) most unsecured debts — credit cards, medical bills, personal loans — typically within 3 to 6 months. It's fast, relatively straightforward, and provides a genuine fresh start.

To qualify, you must pass the "means test," which compares your income to Florida's median income. If your income is below the median, you automatically qualify. If it's above, a more detailed calculation is required.

Chapter 13: The Repayment Plan

Chapter 13 is a reorganization bankruptcy. Instead of discharging debts immediately, you propose a 3- to 5-year repayment plan that pays back some or all of what you owe — based on your disposable income and the value of your non-exempt assets.

Chapter 13 is particularly valuable if you're behind on your mortgage and want to save your home from foreclosure, have non-exempt assets you want to keep, have debts that can't be discharged in Chapter 7 (like certain tax debts or domestic support arrears), or earn too much to qualify for Chapter 7.

Which Should You Choose?

For most people with primarily unsecured debt and limited assets, Chapter 7 is the faster and simpler path to relief. For homeowners behind on their mortgage, people with significant non-exempt assets, or those with income-based debt obligations, Chapter 13 often makes more sense.

The right choice isn't always obvious — it depends on a careful review of your income, assets, debts, and goals. We offer consultations specifically to help Brevard County residents understand their options and make an informed decision.