Choosing between Chapter 7 and Chapter 13 bankruptcy comes down to three things: whether your income qualifies you for Chapter 7, whether you own property that exemptions won’t fully protect, and whether you’re behind on a mortgage or car loan you want to keep. Chapter 7 erases most unsecured debt in about four to six months but lets a trustee sell anything that isn’t exempt. Chapter 13 keeps all your property and instead commits your income to a three-to-five-year repayment plan. Both stop creditor collection the moment you file.
What Chapter 7 Does
Chapter 7 is the faster of the two. A court-appointed trustee reviews what you own, sells any property that isn’t protected by an exemption, and distributes the proceeds to creditors. Qualifying debt left over after that is wiped out.1United States Courts. Chapter 7 – Bankruptcy Basics
Despite the word “liquidation,” most filers lose no property. Federal exemptions protect specific categories up to fixed dollar amounts, and many states offer their own lists that can be more generous. Under the federal figures effective April 1, 2025, you can protect up to $31,575 in home equity, $5,025 in vehicle equity, and $16,850 in household goods and personal property.2Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases Retirement accounts like 401(k)s and IRAs receive broad protection. Anything that doesn’t fit within an exemption, such as a second home, expensive collectibles, or significant cash savings, can be sold by the trustee.
Chapter 7 eliminates most unsecured debts: credit card balances, medical bills, personal loans, and past-due utility bills. Discharge typically arrives around 60 days after the meeting of creditors, so the whole case usually runs four to six months from filing to close.
What Chapter 13 Does
Chapter 13 works on a different premise. Nothing gets sold. Instead, you propose a plan that uses your future income to repay some or all of your debts over three to five years, and you keep all your property in exchange for committing your disposable income to the plan.3United States Courts. Chapter 13 – Bankruptcy Basics
If your income is below your state’s median, the plan lasts three years. If it’s above the median, the plan generally runs five. No plan can exceed five years. There are also debt ceilings: as of April 1, 2025, you must owe less than $1,580,125 in secured debt and less than $526,700 in unsecured debt to qualify.4Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
The real strength of Chapter 13 is what it does for secured debt. If you’re behind on a mortgage, you can fold the past-due amount into the plan and catch up over three to five years while resuming regular payments going forward. The same works for car loans. Filing halts a pending foreclosure through the automatic stay, giving you time to get current. Your plan also has to pay unsecured creditors at least what they would have received in Chapter 7, meaning the value of your non-exempt property. If you have none, they may receive very little. Whatever unsecured balance remains at the end of the plan gets discharged.
How to Choose Between Them
Four questions do most of the work.
Does Your Income Qualify You for Chapter 7?
Chapter 7 requires passing a means test that compares your household income over the past six months to the median for a similarly sized household in your state. If you’re below the median, you qualify and can choose either chapter. If you’re above, the test then looks at your disposable income after allowed living expenses, and filers with too much disposable income get pushed into Chapter 13.5United States Department of Justice. Means Testing
Do You Own Property Exemptions Won’t Cover?
If everything you own fits within your available exemptions, Chapter 7 lets you keep it all and be done in a few months. If you have a home with substantial equity, a second vehicle, or other assets above the exemption limits, Chapter 13 lets you keep those too, provided your plan pays creditors at least the value of the non-exempt portion. This is the main reason people with above-median income prefer Chapter 13 even when they could squeeze through the means test.
What Kinds of Debt Do You Owe?
Chapter 7 is strongest against unsecured debt. It won’t help you keep a house you’re behind on or a car you’ve defaulted on, because those creditors hold collateral and can take the property back if you stop paying. Chapter 13 gives you a structured way to cure missed payments on secured debts while keeping the collateral. It can also spread priority debts like recent taxes and domestic support arrears across the life of the plan instead of forcing payment all at once.
Speed or Control?
Chapter 7 wraps up in four to six months with no ongoing payments. Chapter 13 runs three to five years but gives you far more control over which debts get paid and which assets you keep. Filers whose main problem is credit card and medical debt, and who own little non-exempt property, tend to prefer Chapter 7. Filers behind on a mortgage or holding significant non-exempt assets tend to choose Chapter 13.
The Automatic Stay Applies Either Way
The moment you file under either chapter, federal law halts most collection activity. Creditor calls stop, lawsuits pause, wage garnishments end, and foreclosure proceedings freeze.6Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The stay doesn’t cover criminal proceedings, most family law matters like divorce or custody, or tax audits. If you’ve had a prior case dismissed within the past year, the stay may last only 30 days or not take effect at all, depending on how many recent cases you’ve filed.
Debts That Neither Chapter Erases
Neither chapter clears everything. Certain obligations survive discharge regardless of which one you file:
- Child support and alimony
- Most recent income taxes and other tax debts, though Chapter 13 can spread payments across the plan
- Student loans, unless you prove undue hardship in a separate court proceeding
- Criminal fines and restitution
- Debts for personal injury or death caused by driving while intoxicated
- Debts you fail to list in your bankruptcy paperwork
Student loans deserve a closer look. Discharging them is possible but hard. You have to file a separate lawsuit inside your bankruptcy case and show that repayment would prevent you from maintaining a minimal standard of living, that the situation is likely to persist, and that you’ve made good-faith efforts to repay. Most courts use a framework called the Brunner test. The Department of Justice and Department of Education have introduced an attestation process to standardize how these cases are reviewed, but the bar remains high.
If You’ve Filed Before
Prior bankruptcy filings can block a discharge in a new case. The waiting period depends on the combination:
- Chapter 7 after Chapter 7: eight years between filing dates
- Chapter 13 after Chapter 7: four years
- Chapter 13 after Chapter 13: two years
- Chapter 7 after Chapter 13: six years, dropping to zero if you paid 100% of claims in the prior case, or 70% under a good-faith plan
These periods run from filing date to filing date, not from discharge. Getting the timing wrong means you can go through the whole process and be denied a discharge at the end.
What Filing Costs
The federal filing fee is $338 for Chapter 7 and $313 for Chapter 13. You can ask the court to pay in installments, and Chapter 7 filers with income below 150% of the federal poverty guidelines can request a fee waiver.
Every individual filer also has to complete two educational courses: a pre-filing credit counseling session and a post-filing debtor education course.7United States Courts. Credit Counseling and Debtor Education Courses Each typically runs between $10 and $50, and some providers offer waivers for low-income filers. Only agencies approved by the U.S. Trustee Program count.
Most bankruptcy attorneys charge between $1,000 and $3,000 for a straightforward Chapter 7 or Chapter 13 case. Complex situations run higher. You can file without a lawyer, but the paperwork and deadlines are unforgiving, and mistakes can cost you the case or property you meant to keep.
What Happens to Your Credit
A bankruptcy filing stays on your credit report for up to 10 years from the filing date.8Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports Borrowing will be more expensive in the short term. For most people considering bankruptcy, though, the credit damage from missed payments and collections has already occurred. Filing sets a defined starting point, and most filers see scores begin recovering within one to two years as they build a clean payment history on new accounts.
A Note on Other Chapters
If your debts exceed the Chapter 13 ceilings, Chapter 11 becomes the alternative for individuals with complex finances, though it’s primarily a business reorganization tool. Family farmers and commercial fishermen have their own specialized chapter, Chapter 12, with higher debt limits tailored to seasonal income. For most consumers, though, the real decision is the one between Chapter 7 and Chapter 13.