When considering bankruptcy, the first thing you need to decide is whether Chapter 7 (liquidation) or Chapter 13 (reorganization) is right for your situation. The two schemes differ significantly in purpose, eligibility, and effectiveness, so an accurate comparison is necessary.
Key comparison table
| Item | Chapter 7 | Chapter 13 |
|---|---|---|
| Methods | Debt forgiveness (forgiveness) | 3-5 year repayment plan |
| Duration | 3-6 months | 3-5 years |
| Income limits | Below state median income | Requires regular income |
| Maintain your home | Within exemption limits | Mortgage delinquencies can be resolved |
| Vehicle Maintenance | Within exemption limits | Include in a repayment plan |
| Credit history | 10 years | 7 years |
| Court costs | $338 | $313 |
When Chapter 7 is right for you
- Mainly credit cards, medical bills, etc. Unsecured debtis large, the
- Your income is at or below the New York State median income (passes the Means Test)
- If the assets to be protected are within the exemption limits
- If you want a quick resolution (3-6 months)
When Chapter 13 is right for you
- Mortgage delinquenciesand still want to keep your home.
- If your income exceeds the Means Test threshold
- If you want to protect assets that exceed the exemption limit
- You want to clear up tax or child support arrears
Means Test: Chapter 7 Eligibility Screening
To file for Chapter 7, you must pass the Means Test. If your average income for the last six months is at or below the New York State median household income, you automatically pass. If you make more, you can still file if your disposable income after deducting essential expenses is below the threshold.
New York State Exempt Property (as of 2026)
- Residential real estate: Queens/Kings County $204,825 up to
- VehicleUp to: $4,825
- Retirement accounts: 401(k), IRA fully protected
- Social Security: Fully protected
Frequently asked questions
Q. Can Chapter 7 resolve my mortgage delinquency?
Chapter 7 discharges unsecured debts, but it doesn't directly address mortgage arrears. If you're behind on your mortgage and want to keep your home, Chapter 13 is for you.
Q. If I have a business, which one should I choose?
It depends on the form of business. An LLC or Corporation is a separate legal entity, so it is separate from a personal bankruptcy. Sole proprietorships are judged along with your personal assets. Business bankruptcy requires professional advice.
Q. Can I apply for both at the same time?
You cannot file concurrently, but you can start with Chapter 7 and convert to Chapter 13 if necessary, or vice versa.
If you're not sure which bankruptcy is right for you, talk to a professional. Our office can help guide you on the best course of action for your individual situation.
Phone: (718) 353-2699 | Email: jd@choattorneys.com
