The main difference between Chapter 7 and Chapter 13 bankruptcy is how the debt gets resolved: Chapter 7 is a one-time liquidation that wipes out most unsecured debt in about four months, while Chapter 13 sets up a court-supervised repayment plan that runs three to five years and lets you keep your property. Which one fits depends on your income, what you own, and whether you’re trying to catch up on a mortgage or car loan or just clear unsecured debt like credit cards and medical bills.
Chapter 7 and Chapter 13 at a Glance
Chapter 7 is built for people who genuinely cannot repay their debts. A court-appointed trustee reviews what you own, separates exempt property from non-exempt property, sells the non-exempt assets, and distributes the proceeds to creditors. The remaining unsecured debt is discharged.1United States Courts. Chapter 7 – Bankruptcy Basics In practice, most individual Chapter 7 cases are “no-asset” cases, meaning everything the debtor owns is either exempt or already encumbered by liens, and creditors receive nothing. Discharge typically arrives about four months after filing.2United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
Chapter 13 is designed for people with steady income who can afford to repay some or all of what they owe over time. Instead of selling your assets, you propose a repayment plan that the bankruptcy court must approve. You make monthly payments to a trustee, who pays creditors according to the plan.3United States Courts. Chapter 13 – Bankruptcy Basics Whatever isn’t paid off through the plan is discharged at the end, assuming you’ve met all requirements.
Both chapters trigger the automatic stay the moment you file, which immediately stops most collection activity: lawsuits, wage garnishments, foreclosure proceedings, repossession attempts, and collection calls.4Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The difference is duration. In Chapter 7 the stay lasts a few months until the case closes. In Chapter 13 it protects you the entire three-to-five-year plan, which is often why someone facing foreclosure chooses Chapter 13.
Who Qualifies for Each Chapter
Chapter 7 has an income screen called the means test. Your household income is compared to the median income in your state for a family of your size.5United States Department of Justice. Means Testing Below the median, you qualify automatically. Above it, the test gets more involved: certain allowed monthly expenses come off your income, and the remainder is multiplied by 60 months. If that figure is high enough, the court presumes you can afford to repay creditors and belongs in Chapter 13 instead.1United States Courts. Chapter 7 – Bankruptcy Basics You can rebut that presumption only by documenting special circumstances like unusually high medical expenses or a job loss.
Chapter 13 has no income test, but it does have a debt ceiling. As of April 2025, your unsecured debts must be below $526,700 and your secured debts below $1,580,125.6Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor These limits are adjusted every three years. Debtors above those thresholds have to look at Chapter 11 instead.
Plan length in Chapter 13 also depends on income. If your income is below your state’s median, the minimum commitment is three years. If it’s above the median, you’re generally on a five-year plan.3United States Courts. Chapter 13 – Bankruptcy Basics
What Happens to Your Property
This is where the two chapters diverge most visibly. In Chapter 7, the trustee can sell any property that isn’t covered by an exemption. In Chapter 13, you keep everything, but your plan has to pay unsecured creditors at least as much as they would have received in a Chapter 7 liquidation. So if you have $20,000 in non-exempt equity, your Chapter 13 plan must distribute at least $20,000 to unsecured creditors over its life.
Exemptions come from state law. Each state has its own set of exemption categories covering things like home equity, vehicles, retirement accounts, and personal property. Some states let you choose between the state list and a federal set; others require the state list. The variation is dramatic. Home equity protection ranges from modest fixed amounts to unlimited homestead exemptions depending on where you live. That’s why the same debtor can look like a clean Chapter 7 candidate in one state and a Chapter 13 candidate in another. Local legal advice matters more here than almost anywhere else in the process.
Catching Up on a Mortgage or Car Loan
One of the biggest reasons people choose Chapter 13 is that it lets you cure missed payments on secured debt while keeping the property. If you’re behind on your mortgage, you can fold the overdue amount into the plan and pay it off gradually, as long as you stay current on new payments going forward.3United States Courts. Chapter 13 – Bankruptcy Basics Chapter 7 doesn’t offer that mechanism. If you’re behind on a mortgage in Chapter 7, the automatic stay pauses foreclosure but doesn’t cure the arrears.
Chapter 13 also shields people who co-signed consumer debts with you. While the case is active, creditors are generally blocked from going after co-signers on consumer loans.7Office of the Law Revision Counsel. 11 US Code 1301 – Stay of Action Against Codebtor Chapter 7 has no equivalent co-debtor protection.
Debts Neither Chapter Erases
Some obligations survive bankruptcy regardless of which chapter you file:
- Child support and alimony.
- Most student loans, unless you can prove that repaying would cause “undue hardship,” a difficult standard to meet.
- Recent tax debts. Older income tax debt may be dischargeable if the returns were filed on time and the debt is more than three years old.8Internal Revenue Service. Declaring Bankruptcy
- Debts obtained through fraud or misrepresentation.
- Debts arising from death or personal injury caused by intoxicated driving.9Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
Chapter 13 does have a slightly broader discharge than Chapter 7 for a couple of specific categories. Debts from willful and malicious damage to property (as opposed to injury to a person), and certain debts from divorce property settlements, can be discharged through a completed Chapter 13 plan but not in Chapter 7. If you’re carrying those kinds of obligations, that difference can tip the decision.
How Long the Case Lasts and What It Does to Your Credit
Chapter 7 is quick. Filing to discharge runs about four months in a typical case. Chapter 13 runs three to five years because you’re making plan payments the whole time.
Under federal law, a bankruptcy case can remain on your credit report for up to 10 years from the date the court enters the order for relief.10Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports The statute itself makes no distinction between Chapter 7 and Chapter 13. In practice, the major credit bureaus voluntarily remove a completed Chapter 13 case after seven years, while Chapter 7 stays the full ten. That’s bureau policy, not a legal guarantee.
The score impact is real but not permanent. Many filers see their scores begin recovering within a year or two if they pay new obligations on time. For someone whose credit was already damaged by collections and missed payments before filing, the drop from the bankruptcy itself can be smaller than the damage the defaults already did.
One thing worth going in with your eyes open about: roughly half of Chapter 13 plans are completed successfully. The rest are dismissed or converted to Chapter 7 before the debtor finishes paying. About a third of dismissals happen because the debtor falls behind on plan payments. A three-to-five-year budget commitment is hard to sustain, and realistic expectations matter more in Chapter 13 than almost anywhere else.
What Filing Costs
Federal court filing fees are close but not identical. Chapter 7 costs $338, made up of a $245 case filing fee, a $78 administrative fee, and a $15 trustee surcharge. Chapter 13 costs $313, consisting of a $235 case filing fee and a $78 administrative fee.11United States Courts. Bankruptcy Court Miscellaneous Fee Schedule Chapter 13 filers can pay the filing fee in installments through the repayment plan.
Attorney fees are the bigger expense. For a straightforward Chapter 7, expect roughly $1,000 to $2,000 depending on location and complexity. Chapter 13 attorney fees typically run $2,500 to $4,000 because the case lasts years and involves plan drafting, confirmation hearings, and potential modifications. Chapter 13 fees can often be rolled into the plan rather than paid upfront.
Which Chapter Fits Your Situation
Chapter 7 tends to work best when your income is low enough to pass the means test, you don’t have significant non-exempt property, and your debts are mostly unsecured obligations like credit cards and medical bills. The process is fast and the result is a clean break.
Chapter 13 makes more sense when you have regular income but are behind on secured debts you want to save, like a mortgage or car loan. It’s also the path if your income disqualifies you from Chapter 7, if you have non-exempt assets you’d rather protect by paying into a plan, or if you’re carrying specific debts (like property damage judgments) that Chapter 7 won’t discharge.
The worst outcome is filing the wrong chapter and either losing property you could have kept or committing to a plan you can’t sustain. A bankruptcy attorney who handles cases in your area will know the local exemptions, trustee practices, and court expectations that decide which chapter actually works for you.