Choosing between Chapter 7 and Chapter 13 bankruptcy comes down to three questions: how much you earn, what you own that you want to keep, and whether you’re behind on a mortgage or car loan. Chapter 7 wipes out most unsecured debt in about four months by liquidating any property that isn’t protected by an exemption. Chapter 13 lets you keep everything but requires a court-supervised repayment plan lasting three to five years. If your income is modest and you don’t have significant non-exempt property, Chapter 7 is usually faster and cheaper. If you need to catch up on a home loan or your income disqualifies you from Chapter 7, Chapter 13 is the tool built for that job.
What Each Chapter Actually Does
Chapter 7 is liquidation. A trustee reviews what you own, sells anything not covered by an exemption, and distributes the proceeds to creditors. Whatever qualifying debt remains gets discharged, meaning you no longer owe it. The court typically grants that discharge about four months after you file.1United States Courts. Discharge in Bankruptcy In practice, most consumer Chapter 7 cases are “no-asset” cases: the trustee determines everything the debtor owns falls within exemptions, so nothing gets sold.
Chapter 13 is reorganization. Instead of surrendering assets, you propose a plan using future income to repay some or all of your debts over three to five years. Below the state median income, the plan runs three years. Above it, five.2United States Courts. Chapter 13 Bankruptcy Basics Payments to the trustee start within 30 days of filing, before the court has even confirmed the plan.3Office of the Law Revision Counsel. 11 US Code 1326 – Payments Discharge comes only after you complete every payment the plan requires.
Both chapters trigger an automatic stay the moment you file. Collection lawsuits, wage garnishments, foreclosures, repossessions, and creditor calls stop.4Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay In Chapter 7 the stay lasts until the case closes; in Chapter 13 it protects you for the full length of the plan.
When Chapter 7 Is the Right Choice
Chapter 7 works best when your income is low enough to pass the means test, you don’t own significant non-exempt property, and unsecured debt (credit cards, medical bills, personal loans) is the core of your problem.
The means test compares your household income over the six months before filing to the median income for a household your size in your state.5U.S. Department of Justice. Means Testing Below the median, you qualify automatically. Above it, a second calculation subtracts allowed expenses; if enough disposable income remains to repay a meaningful share of your unsecured debt, the court may find the filing abusive and push you toward Chapter 13. The median figures are updated periodically using Census Bureau data and vary by state and household size.6U.S. Department of Justice. Census Bureau Median Family Income By Family Size
Exemptions decide whether you actually lose property. Federal bankruptcy exemptions protect equity in a home, a vehicle, household goods, tools of your trade, and a wildcard amount that can be applied to anything.7Office of the Law Revision Counsel. 11 USC 522 – Exemptions Some states require you to use state-specific exemptions instead, and those vary widely. A few states have far more generous homestead protections than the federal amount; others are stingier on vehicles or personal property. Which system applies depends on the state where you’ve lived for at least two years before filing. Before deciding on Chapter 7, add up your equity in everything you own and compare it to the exemptions that apply to you. If it all fits, you’ll likely keep it all.
Secured debts (mortgage, car loan) are the weak point of Chapter 7. The discharge eliminates your personal liability, but the lender’s lien on the collateral survives. You have three options: surrender the property, reaffirm the debt by signing a new agreement to keep paying, or redeem the property by paying the creditor its current market value in a lump sum. If you’re current on a mortgage or car loan and want to keep the property, reaffirmation can work. If you’re behind, Chapter 7 gives you no mechanism to catch up.
When Chapter 13 Is the Right Choice
Chapter 13 is the answer when Chapter 7 either isn’t available or doesn’t solve your actual problem. Three situations point clearly to Chapter 13:
You’re behind on a mortgage and want to keep the house. Chapter 13’s central feature is curing arrearages. You fold the missed payments into your repayment plan, spread them across three to five years, and stay current on the ongoing mortgage payments outside the plan. The automatic stay stops the foreclosure the moment you file, and it stays in place for the full plan duration as long as you’re making payments.
Your income disqualifies you from Chapter 7. If you fail the means test, Chapter 13 remains available. It doesn’t use the means test as a gatekeeper.
You have non-exempt property you’re not willing to lose. A car with significant equity, a second vehicle, an inheritance, tools or equipment beyond the exemption cap — anything the Chapter 7 trustee would sell can be kept in Chapter 13. The trade-off is that the value of your non-exempt assets sets a floor for how much your plan must pay unsecured creditors.
Chapter 13 has its own eligibility rules. You need regular income sufficient to fund the plan, whether from wages, self-employment, or benefits. Your debts must fall below statutory caps: as of April 2025, less than $526,700 in unsecured debts and less than $1,580,125 in secured debts, adjusted every three years by the Judicial Conference.8Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor You must also be current on your federal and state tax return filings for the four years before your petition; the court will not confirm a plan from someone with unfiled returns.9Internal Revenue Service. Understanding Federal Tax Obligations During Chapter 13 Bankruptcy
Both chapters require a credit counseling course from an approved agency within 180 days before filing, and a separate debtor education course after filing but before discharge.10United States Courts. Credit Counseling and Debtor Education Courses Skip the pre-filing course and the court dismisses your case.
Cost and Timeline
Court filing fees are close between the two chapters. Chapter 7 is $338 total ($245 filing fee, $78 administrative fee, $15 trustee surcharge). Chapter 13 is $313 total ($235 filing fee, $78 administrative fee).11United States Courts. Bankruptcy Court Miscellaneous Fee Schedule If you can’t pay the Chapter 7 fee, the court can split it into four installments due within 120 days, or waive it entirely if your income falls below 150% of the federal poverty guidelines.12United States Courts. Chapter 7 Bankruptcy Basics Chapter 13 doesn’t offer a fee waiver, though the fee can sometimes be folded into the plan.
Attorney fees are the larger expense. Chapter 7 cases typically run $800 to $3,000. Chapter 13 runs $2,500 to $8,500 depending on complexity and location. Chapter 13 attorney fees are often paid through the plan itself, so you don’t need the full amount upfront. That matters if cash is the reason you’re filing in the first place.
The timeline difference is stark. Chapter 7 wraps up in roughly four months. Chapter 13 runs three to five years by design. If speed matters, that alone can settle the question.
What Each Chapter Erases (and What Survives Both)
Unsecured debts like credit cards, medical bills, and personal loans are the easiest case. Chapter 7 discharges them outright. Chapter 13 pays them whatever your disposable income allows over the plan, then discharges the remaining balance. The plan must pay unsecured creditors at least as much as they would have received in a hypothetical Chapter 7 liquidation.
Priority debts get harder treatment. Child support, alimony, recent income taxes, and administrative costs of the case are “priority” claims.13Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge In Chapter 7, priority creditors get paid first from any liquidation proceeds, and any unpaid balance survives the discharge. In Chapter 13, your plan must provide for full payment of all priority claims; the court will not confirm a plan that shortchanges them.14Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan If you owe significant back taxes or child support, Chapter 13 forces those into your monthly payment.
Some debts survive either chapter:
- Domestic support obligations (child support, alimony)
- Recent income taxes and taxes involving fraud or evasion
- Debts obtained through fraud or misrepresentation
- Debts from willful injury to another person or property
- Government fines, penalties, and criminal restitution
- Student loans, unless you separately prove “undue hardship” in an adversary proceeding13Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
Student loans aren’t automatically included in your discharge. You must file a separate lawsuit within the bankruptcy case and satisfy a hardship analysis that asks whether repayment would prevent a minimal standard of living, whether the situation is likely to persist, and whether you’ve made good-faith repayment efforts. Joint Department of Justice and Department of Education guidance has made discharge somewhat more accessible than it was historically, but the process still requires extra legal work.
One point that occasionally tips the choice: Chapter 13 discharges a slightly broader range of debts than Chapter 7. Debts arising from willful property damage and debts from divorce property settlements can survive a Chapter 7 discharge but can be wiped out through a completed Chapter 13 plan.15Office of the Law Revision Counsel. 11 US Code 1328 – Discharge
Debt forgiven through either chapter is excluded from your gross income under federal tax law, so you won’t get a tax bill for the wiped-out balances.16Internal Revenue Service. Publication 908, Bankruptcy Tax Guide That’s a real difference from a private debt settlement, where forgiven amounts are typically treated as taxable income.
Credit Impact and When You Can File Again
Chapter 7 can remain on your credit report for up to 10 years from the filing date. Chapter 13 is often reported for seven years, though the statute permits up to 10.17Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports The shorter reporting window for Chapter 13 is a credit bureau practice rather than a legal requirement, but it’s a genuine advantage if rebuilding credit quickly matters.
Federal law also sets waiting periods before you can receive a second discharge:
- Chapter 7 after a prior Chapter 7: eight years between filing dates18Office of the Law Revision Counsel. 11 USC 727 – Discharge
- Chapter 13 after a prior Chapter 7: four years between filing dates
- Chapter 13 after a prior Chapter 13: two years between filing dates
- Chapter 7 after a prior Chapter 13: six years between filing dates, unless the prior Chapter 13 paid 100% of claims, or paid at least 70% and represented your best effort in good faith
If You Pick Wrong
Choosing the wrong chapter isn’t necessarily permanent. You generally have the right to convert a Chapter 7 case to Chapter 13 if you haven’t already converted once and you meet Chapter 13’s eligibility rules.19Office of the Law Revision Counsel. 11 USC 706 – Conversion Chapter 13 to Chapter 7 conversion works similarly, but you’ll need to pass the means test. The court can also force a conversion; if a Chapter 7 filer clearly has sufficient income to repay, the court or U.S. Trustee may move to convert the case. Conversion doesn’t require a new filing fee, but it complicates the timeline and introduces new legal issues, so it’s not a step to treat casually.