Key Differences of Chapter 7 and Chapter 13 Bankruptcy in Arlington, TX

Many residents of Arlington, Texas who are dealing with financial troubles turn to a reliable bankruptcy attorney in order to start fresh and alleviate burdens on their life. There are two main types of bankruptcy available for debtors: Chapter 7 and Chapter 13, and they work in different ways to help with debt payments. When filing for bankruptcy, it is important that you understand how these two types differ in order to make informed choices based on your financial situation, income, and goals. In this article, we will discuss some of the key differences between these two common bankruptcy types.


Both Chapter 7 and Chapter 13 bankruptcies serve distinct financial scenarios. Chapter 7, often referred to as “liquidation bankruptcy,” is the choice for those who have significant unsecured debt. Eligibility for this bankruptcy depends on meeting income requirements and passing a means test. Chapter 13, on the other hand, is known as “reorganization bankruptcy,” which caters to debtors with stable incomes. To be eligible for this type of bankruptcy, one should have an unsecured debt of less than $465,275 and a secured debt of less than $1,395,875 when filing between April 1, 2022, and March 31, 2025. Individuals who aim to know which type of bankruptcy they are eligible for may turn to a trusted bankruptcy attorney in Arlington for sound legal advice.


In Chapter 7, there is a possibility that most of the debtor’s assets will be liquidated to fulfill their obligations to creditors. However, crucial assets like primary residences, necessary clothing, and work-related tools are protected through specific exemptions up to a certain value. On the contrary, Chapter 13 presents a more favorable scenario for individuals concerned about their assets, as it allows for the retention of valuable possessions such as homes or vehicles. It extends support for those on the brink of foreclosure or repossession to secure their cherished assets while working towards financial stability.

Debt Discharge

Chapter 7 provides a quicker resolution for individuals struggling with unsettled debts, like medical expenses and credit card bills. However, it is important to keep in mind that not all debts are eligible for discharge under this type of bankruptcy. These non-eligible debts include student loans, child support payments, and tax obligations. Conversely, Chapter 13 offers a structured approach to handling secured and unsecured debts through a repayment plan. Following the successful completion of the repayment plan, individuals may obtain freedom from their remaining unsecured debts, but certain obligations, such as home mortgages and alimony, may still persist.

Chapters 7 and 13 differ beyond eligibility, assets, and debt discharge. While Chapter 7 may resolve debts faster, it also risks asset liquidation and credit score impact. In contrast, Chapter 13 involves a three- to five-year structured repayment plan that can aid those with lower debt. Choosing between these two bankruptcies is a significant decision, which is why seeking professional advice from an experienced bankruptcy attorney in Arlington is strongly recommended. Fortunately, we at Sherman Law Firm PC can provide tailored legal advice to help you understand both types and guide you as you navigate the challenging process of filing for bankruptcy. Do not hesitate to reach out to us today, and our legal team will be more than willing to assist you with your bankruptcy concerns.

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