The choice between liquidation and reorganization bankruptcy comes down to what you want to do with your property and how much you can afford to repay. Liquidation, filed under Chapter 7, sells your non-exempt assets and erases qualifying debts within a few months. Reorganization, filed under Chapter 13 for individuals or Chapter 11 for businesses and high-debt filers, lets you keep your property and repay creditors over three to five years through a court-approved plan. Both routes end in a discharge that wipes out eligible debts, but the path, the timeline, and the cost look very different.
How Each Chapter Works
In a Chapter 7 case, a trustee takes control of your non-exempt property, sells it, and distributes the proceeds to creditors. Anything protected by an exemption stays with you. Once the sale is done and the paperwork clears, qualifying unsecured debts are discharged. The whole process typically wraps up in a few months.
Chapter 13 works the opposite way. You keep everything, including non-exempt assets, and instead commit your disposable income to a repayment plan that runs three to five years. The plan has to pay unsecured creditors at least as much as they would have received in a Chapter 7 liquidation, so your exemptions still matter — they set the floor. A trustee collects your monthly payments and distributes them. Discharge comes after you finish the plan.1Office of the Law Revision Counsel. 11 U.S. Code 1328 – Discharge
Chapter 11 is the reorganization chapter most often used by businesses, though individuals with debts too high for Chapter 13 can file it too. The debtor usually keeps running the business while proposing a plan to restructure obligations. Discharge for an individual Chapter 11 filer generally comes when the court confirms the plan.2Office of the Law Revision Counsel. 11 U.S. Code 1141 – Effect of Confirmation
What You Keep
Both chapters let you protect certain property through exemptions, but the practical result is different.3Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions In Chapter 7, the exemptions decide what you actually keep — anything above the exemption limit can be sold. In Chapter 13, you keep everything, and the exemptions determine how much your repayment plan has to pay unsecured creditors.
For cases filed between April 1, 2025, and March 31, 2028, the federal exemptions protect up to $31,575 of home equity, $5,025 in a motor vehicle, and $1,675 in any property under the wildcard (with up to $15,800 of unused homestead available for wildcard use). Married joint filers can double these figures. Many states have their own exemption systems, and some require you to use the state version instead of the federal one.
If most of your assets are covered by exemptions, Chapter 7 gets you a fast discharge without losing anything. If you have significant non-exempt equity — say, a home you want to keep with more equity than the exemption allows — Chapter 13 protects the property in exchange for the multi-year payment plan.
Timeline and Discharge
Chapter 7 is the faster path. From filing to discharge usually takes a few months.4Office of the Law Revision Counsel. 11 U.S. Code 727 – Discharge Chapter 13 stretches out for three to five years because you have to complete every plan payment before discharge. Chapter 11 sits somewhere in between on paper — discharge follows plan confirmation — but the plan negotiation itself can take months or years depending on the complexity of the debts.
A prior discharge affects your eligibility. You cannot receive a Chapter 7 discharge if you already got one in a case filed within the past eight years.
Filing Costs
Court filing fees differ significantly by chapter:5United States Courts. Bankruptcy Court Miscellaneous Fee Schedule
- Chapter 7: $338 total ($245 filing fee, $78 administrative fee, $15 trustee surcharge)
- Chapter 13: $313 total ($235 filing fee, $78 administrative fee)
- Chapter 11: $1,738 total ($1,167 filing fee, $571 administrative fee)
You can apply to pay court fees in up to four installments, with the last payment due within 120 days of filing. The court can extend that to 180 days for good cause.
Attorney fees add substantially more. A straightforward Chapter 7 case generally runs $800 to $3,000. Chapter 13 attorney fees typically fall between $2,500 and $7,500, though they can often be built into the repayment plan so you do not have to pay the full amount upfront. Chapter 11 costs considerably more because the cases involve more complicated financial structures.
What Both Chapters Share
The differences get the attention, but a lot of the bankruptcy process looks the same no matter which chapter you file.
The Automatic Stay
Filing under any chapter immediately triggers the automatic stay, which halts most collection activity: lawsuits, wage garnishments, creditor calls, and foreclosure proceedings all stop.6Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay Some things continue anyway — criminal cases, most family law matters, and collection of child support or alimony from property that is not part of the bankruptcy estate.
Required Steps for the Debtor
Every filer has to complete the same checklist. You need a credit counseling briefing from an approved nonprofit within 180 days before filing.7Office of the Law Revision Counsel. 11 U.S. Code 109 – Who May Be a Debtor After filing, you submit detailed schedules of assets, liabilities, income, expenses, recent pay stubs, and a projection of income changes.8Office of the Law Revision Counsel. 11 U.S. Code 521 – Debtor’s Duties You attend a meeting of creditors, known as the 341 meeting, where the trustee questions you under oath.9United States Department of Justice. Section 341 Meeting of Creditors And you complete a post-filing financial management course before receiving your discharge. Skip any of these and your case can be dismissed or your discharge denied.
Debts That Do Not Go Away
Discharge does not touch every debt, and the exceptions apply across Chapters 7, 11, and 13 for individuals.10Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge The categories most likely to affect you:
- Child support and alimony are never discharged.
- Recent income taxes generally survive. A tax debt is only potentially dischargeable if the return was due at least three years before filing, was actually filed at least two years before, and was assessed at least 240 days before — all three conditions must be met.
- Student loans survive unless you can prove undue hardship, a difficult standard.
- Debts obtained through fraud or false statements can be preserved if the creditor files a timely objection.
- Debts from willful and malicious injury to another person or their property are not dischargeable.
Creditors challenging a debt on fraud or intentional-harm grounds generally must file within 60 days of the first date set for the 341 meeting. Miss that window and the debt gets wiped along with the rest.
Credit Report Impact
A bankruptcy filing shows up on your credit report for years no matter which chapter you use. The Fair Credit Reporting Act permits reporting for up to 10 years from the filing date.11Office of the Law Revision Counsel. 15 U.S. Code 1681c – Requirements Relating to Information Contained in Consumer Reports In practice, the three major bureaus remove Chapter 13 filings after seven years, though the statute itself caps all bankruptcies at ten. Score recovery typically starts within 12 to 18 months of discharge if you pay any remaining obligations on time and rebuild history responsibly.
Choosing Between Them
The mechanical choice usually comes down to two questions. Do you have income above what you need for basic expenses? If yes, Chapter 13 may be an option and, for some filers, a requirement under the means test. Do you have significant non-exempt property you want to keep, especially home equity above the exemption limit? If yes, Chapter 13 protects it in exchange for the plan payments.
If your income is limited, your assets fit within your exemptions, and your debts are mostly the kind that get discharged, Chapter 7 gives you the fastest and cheapest fresh start. If you need to catch up on a mortgage, protect equity above exemption limits, or manage debts that would not be wiped out anyway (like recent taxes or support arrears), Chapter 13 gives you a structured way to do it with the automatic stay in place the entire time. Chapter 11 comes into play mostly for businesses or for individuals whose debts exceed the Chapter 13 limits.