Deciding to file for bankruptcy can be overwhelming, especially when you’re unsure which chapter is right for your situation. The two most common consumer bankruptcy options are Chapter 7 and Chapter 13. Both provide legal protection from creditors through the automatic stay, which puts a stop to collection calls, wage garnishments, foreclosures, and repossessions. However, each chapter has distinct requirements and outcomes. Here’s what you need to know to make an informed decision.

Chapter 7, is designed to discharge (eliminate) most unsecured debts—such as credit cards, medical bills, and personal loans. It can be an attractive option for individuals who have limited income, few assets, and are primarily burdened by unsecured debts. If you're struggling with unsecured debt, talk to us about chapter 7.

When you file for Chapter 7, a trustee is appointed to review your assets and debts. In most cases, you’re able to keep essential property under the Arizona bankrutpcy exemptions. If you do not want to lose an asset, you apply an available exemption, if there is one available, or file for chapter 13. You qualify for chapter 7 baesd on your income - you qualify by being under the median income or by passing the "means-test". If you qualify for chapter 7 based on the “means test” (which evaluates your income and expenses), Chapter 7 offers a relatively quick path to debt relief. By wiping out most unsecured debts, you can begin rebuilding your financial foundation without the weight of old obligations holding you back.

Chapter 13, on the other hand, is often called a “reorganization bankruptcy.” Instead of eliminating debts outright, you work with the bankruptcy court to develop a three- to five-year repayment plan. This plan consolidates your debts into a single monthly payment, which is made to a trustee and then distributed among your creditors.

This chapter is beneficial for individuals with a regular income who may have fallen behind on mortgage payments, car loans, or other secured debts but still wish to keep those assets. Often time those who are on the verge of foreclosure or carrepossesion file chapter 13 to stop these actions and pay back the arrears of their loans, while eliminating other debt. A Chapter 13 filing can stop foreclosure and repossession proceedings, giving you time to catch up while maintaining ownership of your home, car, and other property. Once you complete the plan successfully, any remaining eligible debts are discharged, offering a fresh start.

f you reside in Phoenix and are considering bankruptcy as a way to tackle overwhelming debt, it’s important to understand the key differences between Chapter 7 and Chapter 13. While both chapters offer legal protection from creditors, their processes, eligibility requirements, and outcomes can vary significantly. Deciding which option is best for you depends on your income, the types of debts you owe, and your goals for the future.

In Arizona, Chapter 7 is typically filed by individuals who have a limited ability to repay their debts. Arizona's exemptions are considered generous , particularly for real property. If you’ve owned your home long enough to qualify for Arizona's homestead exemption, you may protect the full value of your primary residence, Personal property exemptions, such as certain amounts of household items and vehicles up to a certain equity limit, may also apply. There are alos several other arizona bankrutpcy exemptions that apply to assets you may have. It is a qualified bankruptcy attorney's job to advise you on how exemptions apply to your assets and protect them.

By contrast, Chapter 13 is often used by Arizonans with a steady income but need to catch up on missed mortgage payments, vehicle loans, or other secured debts. Instead of eliminating debts outright in a short time, Chapter 13 creates a repayment plan—usually lasting three to five years—based on your disposable income. Throughout this period, you make a single monthly payment to a trustee, who then distributes funds to your creditors. The automatic stay remains in effect, shielding you from foreclosure, repossession, and many other collection activities, as long as you keep up with your plan payments.

One of the primary benefits of Chapter 13 is the ability to keep valuable assets, such as your home or vehicle, even if you’re behind on payments. This chapter can also help you manage tax debts, child support arrearages, and other obligations that might not be dischargeable under Chapter 7. Upon successful completion of the plan, remaining eligible debts are discharged, granting you a clean slate.