Chapter 7, 11, and 13 Bankruptcy: Differences and Which to File

The difference between Chapter 7, Chapter 11, and Chapter 13 bankruptcy comes down to what happens to your debts and your property. Chapter 7 sells off non-exempt assets and wipes out most unsecured debt in about four months. Chapter 13 lets individuals with regular income keep their property and repay creditors through a three-to-five-year plan. Chapter 11 lets a business (or an individual with unusually large debts) restructure and keep operating. All three sit under Title 11 of the U.S. Code, but they answer different problems and carry different eligibility rules, costs, and consequences.

Chapter 7 in Brief

Chapter 7 is liquidation. A court-appointed trustee reviews your assets, sells whatever isn’t protected by an exemption, and pays creditors from the proceeds. Once that’s done, most remaining unsecured debts are discharged. The case typically closes about four months after you file.1United States Courts. Discharge in Bankruptcy – Bankruptcy Basics

Most Chapter 7 filings are “no-asset” cases, meaning the debtor’s property is either exempt or not worth the trustee’s time. Federal exemptions protect up to $31,575 of home equity and up to $5,025 in one vehicle, though state exemption amounts vary and sometimes apply instead.2Office of the Law Revision Counsel. 11 USC 522 – Exemptions

Individuals have to pass a means test to qualify. The test compares your household income to your state’s median. Earn less than the median and you generally qualify. Earn more, and the test looks at allowed expenses to decide whether you actually have enough disposable income to fund a Chapter 13 plan instead.3U.S. Department of Justice. Means Testing

Corporations and partnerships can file Chapter 7, too, but they don’t get a discharge. Their assets get liquidated, creditors get paid whatever the estate can cover, and the entity dissolves. It’s a wind-down, not a fresh start.

One limit worth flagging: if you already received a Chapter 7 discharge, you can’t get another one until eight years have passed since that earlier filing.4Office of the Law Revision Counsel. 11 US Code 727 – Discharge

Chapter 13 in Brief

Chapter 13 is a repayment plan for individuals with steady income who want to keep their property. You propose a plan lasting three to five years and pay your disposable income each month to a Chapter 13 trustee, who distributes it to creditors. If your household income is below your state’s median, the plan runs three years, though the court can extend it for good cause. If your income is at or above the median, the plan runs the full five.5Office of the Law Revision Counsel. 11 USC Ch. 13 – Adjustment of Debts of an Individual With Regular Income

Secured debts, like car loans and mortgage arrears, get priority. Unsecured creditors receive whatever the plan allocates, which is often a fraction of what they’re owed. When you finish plan payments, eligible remaining unsecured debts get discharged.

Chapter 13 has debt ceilings. For cases filed between April 1, 2025, and March 31, 2028, you can’t have more than $1,580,125 in secured debt or more than $526,700 in unsecured debt.6United States Courts. Chapter 13 – Bankruptcy Basics

One feature Chapter 7 can’t match: an automatic stay that extends to anyone who co-signed a consumer debt with you, shielding that co-signer from collection for the duration of your case.7Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor

Chapter 11 in Brief

Chapter 11 is reorganization. It’s designed mainly for businesses, on the theory that a struggling company is often worth more alive than sold for parts. Instead of liquidating, the debtor drafts a plan to restructure debts, renegotiate contracts, and return to profitability. Individuals with debts above Chapter 13’s ceilings can also file under Chapter 11.

Unlike Chapter 7, no outside trustee takes over. The business usually stays in charge of its own operations as a “debtor in possession,” but it takes on fiduciary duties to the bankruptcy estate and creditors, meaning it has to act in their financial interest.8Office of the Law Revision Counsel. 11 USC 1101 – Definitions for This Chapter

The reorganization plan is the heart of the case. It spells out how debts get restructured, whether by cutting principal, stretching payment timelines, swapping debt for equity, or some mix. Affected creditors vote, and the court must confirm the plan. Confirmation requires, among other things, that each creditor class either accepts the plan or receives at least what it would get in a Chapter 7 liquidation.9Office of the Law Revision Counsel. 11 US Code 1129 – Confirmation of Plan Once confirmed, the plan replaces the debtor’s pre-bankruptcy obligations, and the reorganized company operates under the new terms.

Subchapter V for Small Businesses

Traditional Chapter 11 is slow and expensive, which puts it out of reach for many small businesses. Subchapter V, added in 2020, offers a faster and cheaper path. A business qualifies if it owes no more than $3,024,725 in total debts and at least half of that debt comes from business activities.10U.S. Department of Justice. Subchapter V Small Business Reorganizations

Two things make Subchapter V different from standard Chapter 11. The debtor generally doesn’t have to prepare and distribute a formal disclosure statement before proposing a plan. And the absolute priority rule, which normally blocks owners from keeping equity unless unsecured creditors are paid in full, doesn’t apply. A small business owner can hold onto ownership even if unsecured creditors receive less than full payment, as long as the plan commits projected disposable income for three to five years.

The Practical Differences at a Glance

Beyond the mechanics of each chapter, a few practical differences shape the choice:

  • Timeline. Chapter 7 typically wraps up in about four months. Chapter 13 lasts three to five years. Chapter 11’s duration varies with the complexity of the plan.
  • Your property. Chapter 7 liquidates non-exempt assets. Chapter 13 lets you keep property while you repay. Chapter 11 keeps the business operating.
  • Filing fees. As of 2026, Chapter 7 costs $338 to file, Chapter 13 costs $313, and Chapter 11 costs $1,738. Courts can allow individuals to pay Chapter 7 and Chapter 13 fees in installments.
  • Attorney fees. Chapter 7 attorney fees generally run $600 to $3,000. Chapter 13 fees are higher, typically $1,800 to $7,500, because the attorney’s work spans the whole plan. Chapter 11 attorney fees swing widely with business size and can reach six or seven figures.
  • Credit reporting. A Chapter 7 filing stays on your credit report for ten years from the filing date. Chapter 13 drops off after seven.
  • Tax treatment of the discharge. Debt canceled outside bankruptcy is usually taxable income. Debt discharged in Chapter 7, 13, or 11 is excluded from income entirely.11Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments

Debts That No Chapter Wipes Out

No form of bankruptcy erases everything. Certain categories of debt survive discharge in Chapter 7, 13, and 11 alike:

  • Child support and alimony.
  • Most recent income taxes, taxes where no return was filed, and taxes tied to fraud.
  • Student loans, unless you prove undue hardship in a separate court proceeding.
  • Debts obtained through fraud or false financial statements.
  • Debts from willful injury to another person or their property.
  • Criminal restitution, traffic fines, and other government penalties.
  • Personal injury debts from driving while intoxicated.

These carve-outs live in 11 U.S.C. § 523, and creditors can also ask the court to declare specific debts nondischargeable if they were incurred through fraud or bad faith.12Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge

Which Chapter Fits Your Situation

The choice usually turns on four questions: how much you earn, what you own, what kind of debt you have, and whether you need to catch up on a secured loan like a mortgage.

  • Low income, few assets. Chapter 7 is the fastest exit. If you pass the means test and don’t have significant non-exempt property, liquidation clears the slate in about four months.
  • Steady income, behind on a mortgage or car loan. Chapter 13 lets you cure the arrears through the repayment plan while keeping the property. Chapter 7 can’t do that. If you’re behind on a secured loan when a Chapter 7 case closes, the creditor can eventually repossess.
  • Income too high for Chapter 7. The means test may steer you into Chapter 13. You’ll repay a portion of what you owe and keep your assets.
  • Business debts, or personal debts above Chapter 13’s limits. Chapter 11 is the option for businesses that want to keep operating, and for individuals whose debts top $526,700 unsecured or $1,580,125 secured.6United States Courts. Chapter 13 – Bankruptcy Basics
  • Small business under roughly $3 million in debt. Subchapter V of Chapter 11 gives you most of the restructuring power of traditional Chapter 11 at a fraction of the cost.10U.S. Department of Justice. Subchapter V Small Business Reorganizations

Circumstances change, and so can the chapter. A Chapter 13 debtor who loses income can convert to Chapter 7. A Chapter 7 debtor whose income turns out to be too high can convert to Chapter 13. Conversion isn’t always clean, but the option is there.