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

The two chapters most individuals file under — Chapter 7 and Chapter 13 — work very differently and serve very different situations. Choosing the right one matters enormously for your outcome. For more details, see the U.S. Courts bankruptcy basics guide or learn about the cost of filing bankruptcy in Houston.

Chapter 7: The Fresh Start

Chapter 7 eliminates most unsecured debts — credit cards, medical bills, personal loans — in roughly 90 to 120 days. There are no monthly payments to a trustee. You file, attend one short meeting, and your debts are discharged. Most people filing Chapter 7 in Texas keep all of their property because Texas exemptions are so generous.

Chapter 7 is the right fit when you have mostly unsecured debt, your income is at or below the Texas median, you are current on secured debts like your mortgage and car, and you need relief fast.

Chapter 13: The Reorganization Plan

Chapter 13 is a reorganization. You propose a 3-to-5-year repayment plan that pays back some or all of your debts based on what you can afford. At the end of the plan, remaining eligible balances are discharged.

Chapter 13 is the right fit when your income is too high for Chapter 7, you are behind on your mortgage and need to stop foreclosure, you have non-dischargeable debts like back taxes to repay on a structured schedule, or you have already filed Chapter 7 within the last 8 years.

Key Differences

Timeline: Chapter 7 takes 3-4 months. Chapter 13 takes 3-5 years. Payments: Chapter 7 has none. Chapter 13 requires monthly trustee payments. Mortgage arrears: Chapter 7 cannot cure missed payments. Chapter 13 can. Income limits: Chapter 7 has a means test. Chapter 13 has no income floor.

The Right Answer Depends on Your Situation

Call my Houston office at (713) 366-1288 for a free consultation. I will help you understand which path makes the most sense for your income, assets, and goals.