Chapter 7 or Chapter 13: Which Bankruptcy Fits You in Oklahoma?

Almost everyone who comes into my office asks the same question in the first five minutes: which chapter should I file? Usually they have read something online that made it sound complicated. It isn't. Chapter 7 and Chapter 13 both give you a fresh start. They just get you there by different roads.

Chapter 7: wipe it out and move on

Chapter 7 is the fast one. Most people are done in about three to four months. Credit cards, medical bills, personal loans and old judgments are discharged, which means you never owe them again.

To qualify, your income has to pass the means test. The test starts by comparing your household income to the Oklahoma median for a family your size. If you are under it, you are generally in. If you are over it, a second calculation looks at your actual expenses.

People worry about losing everything. That rarely happens. Oklahoma's exemptions are generous, especially for your home, and most people who file Chapter 7 keep everything they own. The trustee can sell property that is not exempt, which is why we go through what you have before we file. More on that in What Can I Keep If I File Chapter 7 in Oklahoma?

Chapter 7 works best when you are current on your house and car payments. If you are behind, filing can pause a foreclosure, but it will not fix the missed payments.

Chapter 13: catch up on your terms

Chapter 13 is a repayment plan that lasts three to five years. Whether yours runs three or five depends mostly on your income. You make one payment to the trustee each month, and the trustee pays your creditors. Whatever unsecured debt is left at the end is discharged.

This is the chapter for people who are behind on their house or car and want to keep them. The missed payments get spread out over the plan, and the foreclosure or repossession stops. It is also the answer when your income is too high for Chapter 7, or when you own property you would lose in a Chapter 7. More on that in Can Chapter 13 Save My House or Car in Oklahoma?

You need steady income to make it work, whether that is a paycheck, a business, Social Security or a pension.

What both chapters do

The day you file, the automatic stay goes into effect. Wage garnishments stop. Collection lawsuits stop. The phone calls stop. If your paycheck is being garnished right now, read How to Stop a Wage Garnishment in Oklahoma.

Both chapters require a short credit counseling course before you file and a financial management course before your discharge. Both include a meeting of creditors with the trustee, which sounds worse than it is. Here is what happens at the 341 meeting.

Some debts survive either chapter. Child support, most recent taxes and, in most cases, student loans stay with you.

Choosing the right one

The right chapter depends on your income, your debts, what you own and what you are trying to protect. Picking the wrong one can cost you property or get your case dismissed. A Chapter 13 can usually be converted to a Chapter 7 later if your situation changes. If you are thinking about filing on your own, read Filing Bankruptcy Without a Lawyer: What the Court Records Show first.

I handle every bankruptcy case personally. The first consultation is free, and by the end of it you will know which chapter fits and what it will cost. Call (918) 221-6190 or request a consultation.

Related: Tulsa bankruptcy attorney; What Can I Keep If I File Chapter 7 in Oklahoma?; Can Chapter 13 Save My House or Car in Oklahoma?.

This article is general information about Oklahoma and federal bankruptcy law, not legal advice for your situation. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.