According to experts at the Law Office of Kim Covington, an Albany-based bankruptcy firm, consumer bankruptcy filings rose sharply during 2025 as inflation, medical debt, and rising living costs continued putting pressure on household finances. Yet despite how common bankruptcy filing has become, many individuals still misunderstand the difference between Chapter 7 and Chapter 13 bankruptcy — especially when it comes to protecting assets like homes, vehicles, savings, and retirement accounts.
For many people, choosing between Chapter 7 liquidation and Chapter 13 repayment plans feels a bit like deciding whether to reset their finances completely or reorganize everything to buy more time. Both bankruptcy options exist to provide legal protection and financial relief, but they work in very different ways depending on income, debt levels, and the assets involved.
Working with an experienced bankruptcy attorney can help individuals better understand which filing option offers the strongest financial protection based on their income, assets, debt structure, and long-term repayment ability.
How Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy is often called “liquidation bankruptcy,” though the term can sound more severe than the reality for many individuals. In most cases, Chapter 7 allows qualifying filers to eliminate unsecured debts such as credit card balances, medical bills, and personal loans within a relatively short period of time.…