Choosing between Chapter 7 and Chapter 13 bankruptcy depends on your income, debts, property, and financial circumstances. If you’re considering filing bankruptcy in Florida, understanding the difference between these two chapters is an important first step.
Chapter 7 generally focuses on the liquidation of nonexempt property and the discharge of certain eligible debts, while Chapter 13 allows an individual with regular income to repay debts through a court-approved plan, usually over three to five years.
At Abolsky & Associates, P.A., we understand that overwhelming debt can make it difficult to know what to do next. This guide explains the key differences between Chapter 7 and Chapter 13 so you can better understand your options before speaking with a bankruptcy attorney Homestead FL residents can turn to for legal guidance.
What Is Chapter 7 Bankruptcy in Florida?
Chapter 7 bankruptcy Florida cases generally involve the liquidation of nonexempt property through a bankruptcy trustee, although many Chapter 7 cases have little or no nonexempt property to liquidate. Eligible individual debtors may receive a discharge of certain debts.
Chapter 7 does not use the long-term repayment plan associated with Chapter 13. Instead, the bankruptcy estate is created when the case begins, and the trustee reviews the debtor’s assets and liabilities.
Certain property may be protected by applicable exemptions, but filing Chapter 7 does not guarantee that every asset will be protected. The potential effect on your home, vehicle, savings, and other property depends on the specific facts of your case and the applicable exemption rules.
Chapter 7 eligibility can also depend on income and other requirements. For certain individual consumer debtors, the Bankruptcy Code requires a means test when current monthly income is above the applicable state median.
How Does Chapter 13 Bankruptcy Florida Work?
Chapter 13 bankruptcy Florida cases allow eligible individuals with regular income to propose a repayment plan for their debts.
The plan generally lasts three to five years, and payments are made to a Chapter 13 trustee who distributes funds to creditors according to the confirmed plan.
Chapter 13 can be particularly useful for individuals who need time to catch up on certain secured debts or want to protect valuable property while addressing their financial obligations.
For example, the U.S. Courts explains that Chapter 13 may allow an individual to catch up on past-due mortgage payments over time and potentially stop a foreclosure proceeding through the automatic stay, although important requirements and limitations apply.
Unlike Chapter 7, Chapter 13 generally does not provide a discharge until the debtor completes the required payments under the confirmed plan, subject to limited exceptions.
Chapter 7 vs. Chapter 13: Key Differences
The difference between Chapter 7 and Chapter 13 comes down largely to how debts are handled and whether you need a repayment plan.
| Chapter 7 | Chapter 13 |
| Generally involves liquidation of nonexempt property | Uses a court-approved repayment plan |
| No long-term repayment plan | Usually lasts three to five years |
| May provide a discharge of certain eligible debts | Discharge generally follows completion of the plan |
| Eligibility requirements apply | Designed for individuals with regular income who meet eligibility requirements |
| Nonexempt assets may be subject to liquidation | Allows eligible debtors to retain property while making plan payments |
| May provide a relatively quick discharge | Requires completion of the repayment plan before the ordinary discharge |
The U.S. Courts describes Chapter 7 as liquidation and Chapter 13 as adjustment of debts for individuals with regular income.
Which Bankruptcy Chapter May Fit Your Financial Situation?
There is no single answer that applies to everyone. Your income, debt, property, and financial goals all affect which chapter may be appropriate.
Chapter 7 may be considered by someone who qualifies and primarily needs relief from eligible debts without committing to a multi-year repayment plan. However, the potential treatment of nonexempt property must be reviewed before filing.
Chapter 13 may be considered by someone with regular income who needs a structured repayment plan or wants to address certain debts while retaining property. The U.S. Courts specifically identifies the ability to keep property and repay debts over time as important features of Chapter 13.
A bankruptcy lawyer Homestead residents can consult can review your financial circumstances and explain which bankruptcy options may be available to you.
What Happens When You File Bankruptcy in Florida?
Filing bankruptcy in Florida begins with submitting a bankruptcy petition to the appropriate federal bankruptcy court.
Bankruptcy cases are governed by federal law, and bankruptcy courts have exclusive jurisdiction over bankruptcy cases.
The filing generally requires detailed information about your income, expenses, property, debts, and financial history. Chapter 13 filers must also submit a proposed repayment plan.
Filing generally triggers an automatic stay that stops many collection actions, although the stay has exceptions and may not stop every type of legal action.
Because bankruptcy involves detailed legal and financial requirements, the U.S. Courts recommends seeking qualified legal advice because bankruptcy can have long-term financial and legal consequences.
Can Bankruptcy Eliminate Every Debt?
No, bankruptcy does not automatically eliminate every type of debt.
A bankruptcy discharge releases a debtor from personal liability for certain qualifying debts, but some debts are excluded from discharge or receive special treatment under federal bankruptcy law. A valid lien may also survive a discharge even when the debtor’s personal liability for the underlying debt is discharged.
This is why reviewing each debt before filing is important. Credit cards, medical bills, personal loans, taxes, student loans, domestic support obligations, secured debts, and other obligations may be treated differently under bankruptcy law.
When Should You Speak With a Bankruptcy Attorney?
You should consider speaking with a bankruptcy attorney before filing if you’re facing overwhelming debt, collection lawsuits, wage garnishment, foreclosure concerns, repossession, or repeated creditor calls.
An attorney can review your financial information, explain potential bankruptcy options, discuss how your property may be treated, and help you understand the legal requirements before you make a filing decision.
At Abolsky & Associates, P.A., we serve individuals and families in Homestead and surrounding South Florida communities who need practical guidance through difficult financial situations.
Conclusion
Choosing between Chapter 7 and Chapter 13 isn’t simply about finding the fastest way to deal with debt. Your income, property, debts, eligibility, and financial goals all matter.
Chapter 7 bankruptcy Florida cases may provide a discharge of certain eligible debts for qualifying individuals, while Chapter 13 bankruptcy Florida cases provide a structured repayment process for eligible individuals with regular income.
If you’re considering filing bankruptcy in Florida, getting legal guidance before submitting your petition can help you understand the potential consequences of each option. Abolsky & Associates, P.A. can help you review your circumstances and understand the bankruptcy process.
If you’re looking for a bankruptcy attorney Homestead FL residents can consult about their financial situation, schedule a consultation with Abolsky & Associates, P.A. to discuss your options and determine what steps may be appropriate for your case.
Frequently Asked Questions
What is the main difference between Chapter 7 and Chapter 13?
Chapter 7 generally involves liquidation of nonexempt property and potential discharge of qualifying debts, while Chapter 13 uses a court-approved repayment plan.
How long does Chapter 13 bankruptcy last?
A Chapter 13 repayment plan generally lasts three to five years.
Can Chapter 7 bankruptcy eliminate all my debts?
No, certain debts are not dischargeable or receive special treatment under bankruptcy law.
Can I keep my property in Chapter 13?
Chapter 13 generally allows eligible debtors to keep property while repaying debts through the court-approved plan.
Does filing bankruptcy stop creditor collection efforts?
Filing generally triggers an automatic stay that stops many collection actions, although exceptions apply.
Do I need a bankruptcy attorney in Florida?
You can file without an attorney, but the U.S. Courts recommends seeking qualified legal advice because bankruptcy has significant legal and financial consequences.