Chapter 7 vs. Chapter 13 Bankruptcy For Credit Card Debt

Chapter 7 vs. Chapter 13 Bankruptcy: Which Eliminates Credit Card Debt?

Mounting credit card debt can feel overwhelming. When minimum payments become impossible and collectors keep calling, bankruptcy might be your path to financial freedom. Both Chapter 7 and Chapter 13 bankruptcy can address credit card debt, but they work differently. Bankruptcy attorney Michael Schwartz can help you understand these differences and file the right option on your behalf.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy offers a fresh start by eliminating most unsecured debts, including credit card debt. This process typically takes three to six months and doesn't require a repayment plan.

Eligibility Requirements

To qualify for Chapter 7 bankruptcy, you must pass the means test, which compares your income to your state's median income. If your income falls below the median, you likely qualify. Those with higher incomes may still qualify if their disposable income after allowed expenses is minimal.

The Process

Once filed, an automatic stay stops all collection activities. A court-appointed trustee reviews your assets and may sell non-exempt property to pay creditors. However, most people keep their essential belongings through bankruptcy exemptions.

Debt Discharge

Chapter 7 completely discharges credit card debt, personal loans, and medical bills. You're no longer legally obligated to pay these debts, and creditors cannot pursue collection.

Understanding Chapter 13 Bankruptcy

Chapter 13 bankruptcy creates a structured repayment plan lasting three to five years. Rather than eliminating debt immediately, you pay a portion of what you owe while keeping your assets.

Eligibility and Income Requirements

Chapter 13 requires a steady income to fund your repayment plan. You must have unsecured debts under $419,275 and secured debts under $1,257,850. This option works well for those who earn too much for Chapter 7 but need debt relief.

Repayment Plan Structure

Your plan consolidates all debts into one manageable monthly payment. The amount depends on your income, expenses, and types of debt. Priority debts like taxes must be paid in full, while unsecured debts like credit cards may receive partial payment.

Asset Protection

Chapter 13 allows you to keep valuable assets, including your home and car, as long as you maintain plan payments.

Chapter 7 vs. Chapter 13: Key Differences for Credit Card Debt

• Repayment: Chapter 7 eliminates credit card debt immediately without repayment. Chapter 13 requires partial repayment over several years through your structured plan.
• Cost: Chapter 7 typically costs less due to its shorter duration and lower attorney fees. Chapter 13 involves ongoing payments and higher total costs.
• Income and Assets: Chapter 7 suits those with limited income who can pass the means test. Chapter 13 works for people with a steady income who want to protect valuable assets.

Navigate Bankruptcy with Attorney Michael Schwartz

Facing financial challenges can be overwhelming, but bankruptcy offers a path to relief. Michael Schwartz, a bankruptcy lawyer serving Bucks, Delaware, Montgomery, and Philadelphia counties, helps individuals and businesses explore options for debt resolution through both Chapter 7 and Chapter 13 bankruptcy.

The Law Office of Michael Schwartz offers free consultations to evaluate your financial situation and explain your options. Whether you need immediate debt discharge through Chapter 7 or structured repayment through Chapter 13, professional legal counsel ensures you choose the best path forward.

Before filing any bankruptcy petition, it's crucial to review asset values and available exemptions. Our skilled bankruptcy attorney guides clients through each step of the process, safeguarding their rights and helping them maximize the benefits of debt relief.

With convenient offices in Southampton, Perkasie, and Havertown, getting the support you need is easier than ever. Contact us today.