What Minneapolis Bankruptcy Attorneys Won’t Tell You About Chapter 7 vs Chapter 13

When you’re drowning in debt, every attorney seems to push you toward the same solution. But here’s what most won’t admit: the type of bankruptcy that works for your neighbor might destroy your financial future.

I’ve watched too many Minneapolis residents get steered into the wrong bankruptcy chapter because their attorney didn’t take time to understand their actual situation. The result? Years of unnecessary payments or lost assets that could have been protected.

The Chapter 7 Pressure Game

Most attorneys love Chapter 7 because it’s faster and easier for them. Three to four months, case closed, next client. They’ll tell you it “wipes the slate clean” without mentioning what you might lose in the process.

Here’s what they don’t emphasize: Chapter 7 is liquidation. The trustee can sell your assets to pay creditors. Sure, Minnesota has exemptions that protect some property, but every situation is different.

Take Sarah, a Minneapolis teacher who owned a small rental property. Her first attorney pushed Chapter 7 hard. “Get rid of the debt fast,” he said. What he didn’t explain clearly was that she’d likely lose the rental property that provided supplemental income for her retirement.

Sarah got a second opinion and learned Chapter 13 would let her keep the property while restructuring her other debts. Same debt relief, completely different outcome.

The Chapter 13 Misconception

On the flip side, some attorneys automatically assume Chapter 13 is “better” because you keep your assets. They’ll set up a three-to-five-year payment plan without really analyzing whether you can stick to it.

Chapter 13 requires steady income and discipline. Miss payments, and your case gets dismissed. Then you’re back where you started, except now you’ve wasted months and legal fees.

The truth is, Chapter 13 isn’t right for everyone. If your income is irregular or you’re dealing with a serious illness, the rigid payment schedule might set you up for failure.

What Really Drives These Recommendations

Some attorneys base their advice on what’s easiest for their practice, not what’s best for you. Chapter 7 cases move quickly and require less ongoing work. Chapter 13 involves years of case management but generates more total fees.

Neither approach considers your specific goals and circumstances.

Thinking about this for your situation? Let’s talk. We’ll walk you through your options—no pressure.

The Income Question Nobody Explains Clearly

Here’s where it gets tricky. Minnesota’s median income figures determine whether you qualify for Chapter 7. But “median income” isn’t just your salary.

The calculation includes your spouse’s income (if you’re married), bonuses, side gigs, even unemployment benefits from the past six months. Many people think they don’t qualify for Chapter 7 when they actually do.

Conversely, some folks assume they qualify when they’re over the median. There’s still the “means test” which looks at your actual expenses. High medical bills, child care costs, or other necessary expenses might still get you into Chapter 7.

Asset Protection Strategies They Skip

Both chapters offer asset protection, but in different ways. Chapter 7 uses exemptions to protect property from liquidation. Chapter 13 lets you keep non-exempt assets by paying their value through your plan.

The key is understanding Minnesota’s specific exemptions. Your home, car, retirement accounts, and personal belongings get different levels of protection. Some attorneys don’t take time to maximize these protections.

For instance, Minnesota’s homestead exemption is generous, but there are residency requirements. If you moved here recently, federal exemptions might be better. These details matter tremendously.

The Timing Factor

When you file matters more than most people realize. File too early, and you might not capture all your debts. File too late, and creditors might grab assets or garnish wages.

There’s also the eight-year rule. You can’t get another Chapter 7 discharge if you received one in the past eight years. This affects strategy, especially if you have ongoing issues that might create future debt problems.

Your Path Forward

The right bankruptcy choice depends on your income, assets, goals, and timeline. It’s not a one-size-fits-all decision, despite what some attorneys might imply.

At Hoverson Law Offices, P.A., we take time to understand your complete financial picture before recommending any path forward. We’ve helped countless Minneapolis residents navigate both Chapter 7 and Chapter 13, always focusing on what works best for their specific situation.

Don’t let anyone pressure you into a quick decision. Your financial future is too important. Contact us today for an honest assessment of your options and a clear explanation of what each choice really means for you.