If you're facing overwhelming debt, filing for bankruptcy may be the best way to reset your finances and stop creditor harassment. But one of the first decisions you'll need to make is whether to file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code.
Both options are available to Arizona residents, but they serve very different purposes. Here’s a breakdown of the key differences—and how Arsenal Law can help you decide which one is right for your situation.
Chapter 7 is often referred to as “liquidation bankruptcy.” It allows you to eliminate most unsecured debts—including credit card bills, medical debts, and personal loans—without a repayment plan. It’s typically the fastest and most straightforward type of bankruptcy. The vast majority of people who file bankruptcy will choose Chapter 7 if it is available to them based on a Means Test.
Key benefits of Chapter 7:
Chapter 7 is best for:
People with normal income, few assets, and mostly unsecured debts.
Chapter 13 is a reorganization plan that lets you keep your property and pay back some or all of your debts over 3 to 5 years. Instead of liquidating assets, you make monthly payments based on your income and ability to pay.
Key benefits of Chapter 13:
Chapter 13 is best for:
People with significant income who are behind on mortgage payments, owe tax debts, or don’t qualify for Chapter 7.
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Timeline | 4–6 months | 3–5 years |
| Debt Discharge | Most unsecured debts | Some debts after repayment |
| Property Risk | May lose non-exempt assets | Keep all property |
| Income Requirement | Must pass means test | Must have steady income |
| Stops Foreclosure? | Temporarily | Yes, and allows repayment |
| Payment Plan? | No | Yes |
Arizona has its own bankruptcy exemption laws, which protect certain property from being taken by the bankruptcy court. These include:
These exemptions play a key role in determining whether Chapter 7 is feasible or whether Chapter 13 may be safer to preserve assets.
Choosing between Chapter 7 and Chapter 13 depends on:
At Arsenal Law, we walk you through each option, review your financial situation, and explain which route will give you the most protection and the best chance for a fresh start.
Filing for bankruptcy is a serious step—and it’s not one you should take without expert guidance. At Larson Law Office, we help clients across Arizona understand their options and move forward with confidence. Whether you qualify for Chapter 7 or need the structure of Chapter 13, we’ll help you protect your assets and rebuild your future.
Schedule a Free Consultation Today
Call 480-582-5228 or book online at www.ArsenalLawAZ.com to get started.
