Chapter 7 vs. Chapter 13 in Lexington: Which Suits You?
Filing for bankruptcy isn’t something anyone looks forward to. But if you’re dealing with serious debt in Lexington, it might be the fresh start you need. The tough part is figuring out which type of bankruptcy fits your situation–Chapter 7 or Chapter 13. They’re both different and come with their pros and cons.
In this article, we’ll break things down in a clear way–how each one works, what you need to qualify, and what it could mean for your future, so you can decide what’s best for you.
What is Chapter 7 Bankruptcy
Chapter 7 is sometimes called “liquidation bankruptcy” because it’s meant to wipe out certain debts if you can’t afford to pay them.
It’s a common choice for people in Lexington who are struggling with:
- Credit card debt
- Medical bills
- Personal loans
These are called unsecured debts–they aren’t tied to any property like a house or a car.
Who Can Qualify?
To file for Chapter 7, you’ll need to pass a means test. This compares your income to the average income in Kentucky. If your income is below the state median (around $51,000 a year for one person), you may qualify. If it’s higher, you might still qualify, but the test looks at your expenses also.
How it Works
Here’s a quick look at what happens when you file:
- A court assigns a trustee to review your case.
- In some cases, the trustees can sell non-exempt property to pay your creditors.
However, most people don’t lose anything since Kentucky law protects your primary home, vehicle, and personal items and household goods.
How Long Does It Take?
The process is usually quick. From start to finish, it takes about three to four months. Once it’s done, most of your unsecured debts are completely erased.
If you’re looking for a fast way to clear debt and you’re not worried about losing valuable property, Chapter 7 could be a good option to consider.
What is Chapter 13 Bankruptcy?
Chapter 13 is often called “reorganization bankruptcy”. It doesn’t wipe out your debt right away like Chapter 7 does. Instead, it gives you a chance to pay back some or all of what you owe over time, usually over three to five years.
This type of bankruptcy is a good fit if you:
- Have a steady income
- Are behind on your mortgage or car payments
- Want to avoid foreclosure or repossession
- Own valuable property that you want to keep
How It Works
You’ll work with the court to create a monthly payment plan and send payments to a court-appointed trustee each month. That trustee then pays your creditors based on the plan. The amount you pay depends on your disposable income–what’s left after covering basic living expenses.
Why People Choose Chapter 13
One of the biggest benefits of Chapter 13 is that it helps you keep your home, car, or other important property while giving you time to catch up on payments.
Once your repayment plan is done, any leftover unsecured debt, like credit cards or medical bills, might be wiped out. If you need time to get back on track and protect what you own, Chapter 13 could be the right move.
Which Chapter Fits Your Situation?
Trying to decide between Chapter 7 and Chapter 13? It comes down to your situation. Here are some questions to help you figure out which one might be the better fit:
Do you have little to no income and mostly unsecured debt, like credit cards or medical bills?
If yes, Chapter 7 might be the better option. It’s faster and can wipe out those types of debts without requiring monthly payments.
Are you behind on your mortgage or car loan and want to catch up without losing your property?
Chapter 13 may work better. It gives you time–three to five years–to make up those missed payments while keeping your home or vehicle.
Do you own valuable things that aren’t protected under bankruptcy exemptions?
If keeping your stuff is important to you, Chapter 13 might help you do that. It doesn’t involve selling off your property like Chapter 7 might.
Do you need a clean slate fast, and don’t have much to lose?
Chapter 7 is usually quicker–most cases are done in just a few months, so if time matters and you’re not worried about protecting big assets, this could be a better route.
At the end of the day, choosing between Chapter 7 and Chapter 13 isn’t just about your current debt. It’s also about your plans. Are you trying to save a home? Keep a car? Just move on from overwhelming bills? The right choice depends on what matters most to you and where you see yourself down the road.
Things to Consider Before Filing
Before deciding to file for either type of bankruptcy, keep the following in mind:
- Counseling is required: You must complete pre-filing credit counseling and a post-filing debtor education course.
- Legal and court fees: Each chapter comes with its own set of fees. Chapter 7 typically requires payment upfront; Chapter 13 costs are often rolled into the repayment plan.
- Effect on your credit: Bankruptcy impacts your credit, but it also gives you a chance to rebuild.
- Impact on cosigners: In Chapter 13, you may be able to protect cosigners; Chapter 7 may leave them exposed to collection efforts.
Why Talking to a Lexington Bankruptcy Attorney Matters
Bankruptcy laws are federal, but Kentucky’s state exemptions and local court procedures make it essential to get personalized advice. A Lexington debt lawyer can help you:
- Explain your options based on your income, your debts, and Kentucky’s specific laws.
- Help you figure out whether Chapter 7 or Chapter 13 is the better choice for your situation.
- Make sure your paperwork is done right so you don’t run into delays or mistakes.
- Stand by you in court or meetings with creditors, so you don’t have to face it all alone.
Final thoughts
Bankruptcy isn’t the end–it’s a chance to reset, regroup, and rebuild. Everyone’s situation is different, and that’s okay. What matters most is taking the time to understand your options and making choices that move you forward.
If you’re feeling stuck, don’t be afraid to ask questions or reach out for help. The right support can make a tough situation a little easier–and remind you that there’s a way through it.