Choosing Between Chapter 7 and Chapter 13 Bankruptcy in Oklahoma

The vast majority of Oklahomans who file for personal bankruptcy end up doing so under either Chapter 7 or Chapter 13 of the relevant federal statutes. While it is also possible to file for Chapter 11 bankruptcy as an individual, that tends to be an overly complicated, expensive, and time-consuming option.

Choosing between Chapter 7 and Chapter 13 typically ends up being fairly straightforward, which benefits most of those who need this type of protection from creditors. An article posted at highlights all the most important considerations and the role played by each in the decision.

The Most Important Choice to Make When Filing for Bankruptcy

Although Chapter 7 and Chapter 13 bankruptcy are both aimed specifically at individuals, they differ in a number of significant ways. Chapter 7 bankruptcy is designed to provide an essentially fresh start, with all or most of the petitioner’s debts being wiped out in the process.

On the other hand, Chapter 13 sees a debtor paying off at least some portion of those debts that had become too large to service without the intervention of the court. Naturally enough, debtors will also face differing requirements and downsides depending on which of these bankruptcy options they choose.

A Fairly Straightforward Calculus

Fortunately, it tends not to be especially difficult to decide whether to file for Chapter 7 bankruptcy or to seek protection under Chapter 13 instead. Some of the issues that will normally be taken into account include:

  • Income. Chapter 13 is often described as “wage earner’s bankruptcy,” and for good reason. Under this type of bankruptcy, the court will work out and enforce repayment agreements that are less onerous to the debtor. Only those who have enough income to live up to such terms will normally be able to obtain Chapter 13 protection.
  • Assets. The main advantage of Chapter 13 over Chapter 7 is that the former does not see the assets of the debtor being liquidated. As such, people who have assets that are needed to keep earning income will almost always opt for Chapter 13 where available.

Simple considerations like these tend to clarify which of the two most commonly sought forms of personal bankruptcy will be most appropriate. An attorney will inevitably be able to help a client work through such questions.