Last updated: May 17, 2026
⚖️ Chapter 7 vs Chapter 13 Bankruptcy: Which Should You File?
📊 Side-by-Side Comparison
| Aspect | Chapter 7 | Chapter 13 |
|---|---|---|
| What Happens | Non-exempt assets are sold (liquidated) to pay creditors; remaining eligible debt is discharged. | You keep your property and repay some or all debt via a court-approved 3-5 year plan. |
| Timeline to Discharge | About 4-6 months. | 3 to 5 years (length of the repayment plan). |
| Eligibility | Must pass the means test (income below your state's median, or fail the test another way). | Must have regular income; no income cap, but debt limits apply. |
| Property | Non-exempt assets can be sold; exemptions vary by state. | Keep all property as long as you keep making plan payments. |
| Best For | Lower income, few non-exempt assets, want a fast clean break. | Behind on mortgage/car payments, income too high for Ch. 7, want to keep assets. |
| Credit Report Impact | Stays on report up to 10 years. | Stays on report up to 7 years. |
| Bottom Line | Fastest discharge if you qualify and own little. | Slower but protects your home, car, and higher income. |
What is Chapter 7?
Chapter 7 bankruptcy — often called "liquidation" or "straight bankruptcy" — is the fastest route to discharging unsecured debt like credit cards, medical bills, and personal loans. A court-appointed trustee sells any non-exempt assets to pay creditors, but most filers keep everything because state and federal exemptions protect essentials: a primary vehicle up to a value cap, basic household goods, retirement accounts, and often a portion of home equity. Once the process runs its course — typically 4 to 6 months from filing to discharge — remaining eligible debts are wiped out.
To qualify, you must pass the means test: if your household income is below your state's median for your family size, you generally qualify automatically. If it's above, a further calculation of allowed expenses determines eligibility. Chapter 7 doesn't stop a mortgage or car loan foreclosure/repossession process for long — it only delays it — because secured debts must still be paid or the collateral surrendered.
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What is Chapter 13?
Chapter 13 bankruptcy — "reorganization" — lets you keep your property while repaying creditors under a court-approved plan lasting 3 to 5 years, based on your income and debts. It's the go-to option for people who are behind on mortgage or car payments but want to keep the home or vehicle: Chapter 13 lets you catch up on arrears over the plan length instead of losing the property immediately. There's no income cap to qualify, only a requirement for steady, sufficient income to fund the plan and unsecured/secured debt limits set by law.
At the end of the plan, remaining eligible unsecured debt is discharged. Chapter 13 also offers tools Chapter 7 doesn't — such as "cramming down" some secured debts to the collateral's value, or spreading out tax debt. The trade-off is time and commitment: missing plan payments can result in the case being dismissed, losing the bankruptcy protection you were counting on.
🔑 Key Differences
- Speed: Chapter 7 discharges in ~4-6 months; Chapter 13 takes 3-5 years.
- Property: Chapter 7 can require selling non-exempt assets; Chapter 13 lets you keep everything while paying the plan.
- Eligibility: Chapter 7 requires passing a means test; Chapter 13 has no income cap but needs steady income.
- Missed payments: Chapter 13 can cure mortgage/car arrears over time; Chapter 7 does not stop foreclosure or repossession long-term.
- Credit impact: Chapter 7 stays on your report up to 10 years; Chapter 13 up to 7 years.
- Cost: Chapter 7 filing fees and attorney costs are generally lower than a multi-year Chapter 13 case.
- Decision driver: Your income relative to the means test, and whether you have assets or arrears you need to protect.
When to Use Chapter 7
- Your income is below your state's median for your household size.
- You own few non-exempt assets to protect.
- You want the fastest possible discharge of unsecured debt.
- You're not trying to catch up on a mortgage or car loan.
When to Use Chapter 13
- Your income is too high to pass the Chapter 7 means test.
- You're behind on mortgage or car payments and want to keep the property.
- You have non-exempt assets you don't want a trustee to sell.
- You need to catch up on tax debt or child support arrears over time.
⚖️ Pros and Cons
✅ Chapter 7 — Pros
- Fast discharge (~4-6 months)
- Lower cost overall
- Wipes out most unsecured debt
- Simple, well-defined process
❌ Cons
- Must pass the means test
- Non-exempt assets can be sold
- Doesn't cure mortgage/car arrears
- Stays on credit report 10 years
✅ Chapter 13 — Pros
- Keep your home, car, and other property
- No income cap to qualify
- Catches up missed mortgage/car payments
- Can reduce some secured debt balances
❌ Cons
- Takes 3-5 years to complete
- Requires steady income to fund the plan
- Case can be dismissed if you miss payments
- More paperwork and ongoing court oversight
💡 Real-World Examples
Example 1: Renter With Credit Card Debt
A single renter earning $38,000/year in a state with a $52,000 median for one person passes the means test easily. With $22,000 in credit-card debt and no real assets to lose, Chapter 7 discharges the debt in about 5 months for a fraction of what Chapter 13 would cost in time and fees.
Example 2: Behind on the Mortgage
A homeowner who fell $9,000 behind on mortgage payments after a job loss but has since found new work proposes a 5-year Chapter 13 plan. Spreading the $9,000 arrears over 60 months means payments of $150/month on top of the regular mortgage — keeping the home instead of facing foreclosure.
Example 3: Income Too High for Chapter 7
A married couple earning $95,000/year in a state with an $80,000 median for a family of two fails the means test. They file Chapter 13 instead, repaying $600/month for 5 years ($36,000 total) toward $60,000 of unsecured debt — the rest is discharged at the end of the plan.
❓ Frequently Asked Questions
Which is easier to qualify for, Chapter 7 or Chapter 13?
Chapter 7 has an income-based means test you must pass; Chapter 13 has no income cap but requires steady income to fund a repayment plan, so eligibility depends on your specific numbers.
Can I keep my house in Chapter 7?
Often yes, if your home equity is within your state's exemption and you stay current on the mortgage. If you're behind on payments, Chapter 13 is usually the better route to catch up and keep the home.
How much debt is actually forgiven?
In Chapter 7, most unsecured debt is fully discharged. In Chapter 13, you repay what your plan requires (often based on disposable income), and remaining eligible unsecured debt is discharged at the end of the 3-5 year term.
Will bankruptcy wipe out all my debt?
No — certain debts like most student loans, recent taxes, alimony, and child support generally survive both chapters. Use our [debt payoff calculator](/calculators/debt-payoff-calculator.html) to see what a non-bankruptcy payoff plan would look like first.
How long does bankruptcy affect my credit?
Chapter 7 remains on your credit report for up to 10 years from filing; Chapter 13 for up to 7 years, since it involves partial repayment. Scores can begin recovering well before the listing drops off, especially with on-time payments afterward.
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