Chapter 7 vs. Chapter 13 Bankruptcy in Oklahoma

Understanding Bankruptcy Options

When faced with overwhelming debt, understanding your bankruptcy options can be crucial. Two of the most common bankruptcy chapters individuals consider are Chapter 7 and Chapter 13. Each has its unique benefits and limitations, making it essential to determine which is right for you based on your financial situation.

Key Differences Between Chapter 7 and Chapter 13

Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," allows for the discharge of most unsecured debts. This means that your assets, minus exemptions specified by law, may be sold to pay off creditors. It's generally a faster process, typically completed in three to six months, and can be beneficial for those without significant assets. In contrast, Chapter 13 bankruptcy, known as "reorganization bankruptcy," involves creating a repayment plan to pay off debt over three to five years. This option allows individuals to keep their property and catch up on missed payments on secured assets like homes and cars. It can be more suitable for those with a steady income and valuable assets they wish to retain.

Eligibility Criteria

For Chapter 7, you must pass a means test, proving that your income is too low to repay debts. On the other hand, Chapter 13 requires that you have a regular income and that your unsecured debts are less than $526,700 and secured debts are less than $1,580,125, (as of April 1, 2025) making it essential for debtors to evaluate their financial standings before choosing between the two.

Considerations for Oklahomans

Oklahoma residents should consider the applicable exemption laws, which can influence the decision between filing Chapter 7 or Chapter 13. For instance, Oklahoma provides generous homestead exemptions, which can be a critical factor for those wanting to protect their homes during bankruptcy.  Depending on how long you have lived in Oklahoma, you may use the Oklahoma exemptions or the exemptions from the state you moved here from.  In Texas, the individual can elect to use the Texas exemptions or the federal exemptions.  Which exemptions will apply to your case is a legal test that a qualified attorney should determine.  An attorney can also assist in planning, so that you can be sure to maximize the bankruptcy code provisions to your benefit within the legal parameters.

Seeking Professional Guidance

Given the complexities of bankruptcy law, consulting with a bankruptcy attorney can provide invaluable guidance tailored to your specific circumstances. A professional can help navigate the process, ensuring your rights and assets are protected, and you make the best decision for your financial future.