Choosing between Chapter 7 vs Chapter 13 bankruptcy usually comes down to two questions: do you qualify for Chapter 7, and do you have property you need to protect? Chapter 7 erases most unsecured debt in about four to six months but can require giving up non-exempt property. Chapter 13 lets you keep everything you own and catch up on missed mortgage or car payments through a three-to-five-year repayment plan. Neither is universally better. The right chapter depends on your income, what you own, the kinds of debt you carry, and whether a home or vehicle is at risk.
What Chapter 7 Does
Chapter 7 is a liquidation. A court-appointed trustee reviews what you own, sells anything not protected by an exemption, and pays creditors from the proceeds.1Office of the Law Revision Counsel. 11 US Code 704 – Duties of Trustee The court then discharges your remaining eligible unsecured debts — credit card balances, medical bills, personal loans, and similar obligations. Once discharged, those debts are gone, and creditors can never collect on them.
In practice, most Chapter 7 cases are “no-asset” cases, meaning everything the filer owns fits within an exemption and the trustee sells nothing. Start to finish, a typical case runs four to six months, making Chapter 7 the fastest form of personal bankruptcy.2United States Courts. Chapter 13 – Bankruptcy Basics The tradeoff is that Chapter 7 gives you no way to catch up on secured debts. If you’re behind on your mortgage, the lender can proceed with foreclosure once the case ends.
Chapter 7 tends to fit renters, people driving modest cars, and anyone whose main problem is unsecured debt they cannot realistically repay.
What Chapter 13 Does
Chapter 13 is a reorganization. Instead of liquidating anything, you propose a repayment plan to a court-appointed trustee, make a single monthly payment, and the trustee distributes the money to creditors.2United States Courts. Chapter 13 – Bankruptcy Basics The plan lasts three to five years depending on your income, and remaining qualifying unsecured debts are discharged at the end.
The core advantage is asset protection. You keep the house, the car, and the rest of your property as long as you stick to the plan. If you’ve fallen behind on a mortgage, Chapter 13 lets you spread the missed payments across the plan period while keeping current on regular payments going forward.2United States Courts. Chapter 13 – Bankruptcy Basics For homeowners facing foreclosure, that feature alone is usually decisive.
Chapter 13 also extends certain protections to co-signers on consumer debts, gives you a structured way to pay non-dischargeable tax debt over time, and can discharge some debts that a Chapter 7 would leave in place.
Do You Qualify?
Chapter 7 Eligibility: The Means Test
Chapter 7 eligibility runs through a calculation called the means test. First, your average monthly income over the six months before filing is compared to the median income for a household your size in your state.3United States Department of Justice. Means Testing Fall below the median and you pass.
Above the median, a second calculation applies. You subtract allowed expenses from your income to figure your disposable income. If very little is left, you can still file Chapter 7.4Office of the Law Revision Counsel. 11 US Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13 If the math shows you could make meaningful payments to creditors, the court presumes filing Chapter 7 would be an abuse, and you’ll likely need to file Chapter 13 instead.
Chapter 13 Eligibility: Income and Debt Limits
Chapter 13 requires a regular income source large enough to fund a repayment plan. Your debts must also fall within specific ceilings: unsecured debts under $526,700 and secured debts under $1,580,125.2United States Courts. Chapter 13 – Bankruptcy Basics Congress temporarily raised these limits in 2022 and replaced them with a single $2.75 million cap, but that increase expired in mid-2024 and the older limits returned. Debts above these thresholds put Chapter 13 out of reach; Chapter 11 becomes the alternative.
Both chapters require a credit counseling session with an approved nonprofit within 180 days before filing, plus a debtor education course after filing and before discharge.5Office of the Law Revision Counsel. 11 US Code 109 – Who May Be a Debtor6United States Courts. Credit Counseling and Debtor Education Courses Skip either and the court will dismiss your case.
What You Keep and What You Risk
Exemptions decide which assets are off-limits to a Chapter 7 trustee. Federal law provides a set of exemptions, but roughly two-thirds of states have opted out and require filers to use state-specific exemptions. Which set applies depends on where you’ve lived for the two years before filing.
Under the federal exemptions, most recently adjusted in April 2025, the key protected amounts are:7Office of the Law Revision Counsel. 11 USC 522 – Exemptions
- Homestead: up to $31,575 in equity in your primary residence
- Motor vehicle: up to $5,025 in equity in one car
- Personal property: up to $800 per item and $16,850 total for household goods, clothing, and appliances
- Wildcard: up to $1,675 in any property, plus up to $15,800 of any unused homestead amount, which helps renters
- Retirement accounts: pensions and IRAs are protected for all filers, even in states that have opted out of the federal exemptions
These figures apply to your equity, meaning value minus any loan secured by the property. If you owe $280,000 on a home worth $300,000, you have $20,000 in equity, well within the federal homestead exemption. State exemptions vary widely: some states protect unlimited home equity, others cap it below the federal amount. Married couples filing jointly can usually double these figures.
In Chapter 13, exemptions matter less because you keep all your property regardless. They still affect the plan math: your unsecured creditors have to receive at least what they would have received if your non-exempt assets had been sold in a Chapter 7.
Which Debts Actually Get Wiped Out
Neither chapter discharges everything. The following survive both:
- Child support and alimony (domestic support obligations are never dischargeable)8Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
- Most student loans, unless you file a separate lawsuit within your case and prove repayment would cause undue hardship; the Department of Justice issued updated guidance in 2022 aimed at making that process less burdensome9United States Department of Justice. Student Loan Guidance
- Recent federal income tax debt (generally must be at least three years old, with timely filed returns, to qualify for discharge)10Internal Revenue Service. Declaring Bankruptcy
- Debts from fraud or intentional harm to another person
- Criminal fines, restitution orders, and most court-imposed penalties
Chapter 13 does discharge a somewhat broader range of debts than Chapter 7. Debts for willful damage to property (as opposed to personal injury), certain non-criminal government fines, and debts arising from property division in a divorce can be discharged through a completed Chapter 13 plan but would survive Chapter 7. This wider Chapter 13 discharge is one of the less obvious reasons to pick it.
One other benefit spans both: debt discharged in bankruptcy is not treated as taxable income, unlike ordinary debt forgiveness outside of a case.11Internal Revenue Service. Cancellation of Debt – Basics
Cost and Timeline
Federal court filing fees are $338 for Chapter 7 (a $245 filing fee, a $78 administrative fee, and a $15 trustee surcharge) and $313 for Chapter 13 (a $235 filing fee plus a $78 administrative fee).12United States Courts. Bankruptcy Court Miscellaneous Fee Schedule Chapter 7 filers who can’t afford the fee can pay in installments or request a waiver if income is below 150% of the poverty line. Chapter 13 filers can roll the filing fee into their repayment plan.
Attorney fees are the larger expense. Chapter 7 representation generally runs $800 to $2,700 depending on complexity and location. Chapter 13 attorneys typically charge $2,500 to $6,000 or more because the case lasts years and involves drafting and defending a repayment plan. Many Chapter 13 attorneys are paid through the plan itself, so you may not need the full fee upfront.
On timing: Chapter 7 wraps in about four to six months. Chapter 13 lasts three to five years by design, with discharge only at the end.
Credit Impact
Under the Fair Credit Reporting Act, credit reporting agencies can list a bankruptcy for up to 10 years from the date the court enters the order for relief.13Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports The statute sets that 10-year maximum for all chapters, and the CFPB confirms the same timeframe applies to both Chapter 7 and Chapter 13.14Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports? Some bureaus voluntarily remove completed Chapter 13 cases after seven years, but that’s a business practice rather than a legal requirement.
The impact is real but not permanent. Many filers start receiving credit card offers within months of a Chapter 7 discharge, generally at high interest rates. Rebuilding looks the same after either chapter: use a secured card responsibly, pay every bill on time, and give it time. Meaningful score improvement usually shows up within two to three years of discharge for filers who stay current on new obligations.
How to Decide
The choice usually resolves along a few lines.
Chapter 7 tends to fit if your income is below your state’s median, you don’t have significant non-exempt assets, and your problem is unsecured debt like credit cards or medical bills. It’s faster, cheaper, and wipes the slate clean.
Chapter 13 fits when you have something to protect. Home equity above your state’s exemption, a mortgage you’ve fallen behind on, or a car you need to keep despite missed payments all point toward Chapter 13. It’s also the path for people who earn too much to pass the means test but still need debt relief.
Chapter 13 also makes sense in narrower situations: a co-signer on a consumer debt you want to shield, older tax debt you need to pay through a structured plan, or a divorce property-settlement debt Chapter 7 wouldn’t touch. If the debts you’re carrying include those that survive Chapter 7 but not Chapter 13, the broader Chapter 13 discharge matters.
Chapter 7 is often assumed to be the better option because it’s faster, but a completed Chapter 13 plan can leave you in a stronger position: mortgage current, car paid off through the plan, and a wider set of debts eliminated. What you’re trying to protect, and what your income allows, decide the answer.