Chapter 7 vs Chapter 13 Bankruptcy: Which Fits You?
Chapter 7 wipes out most unsecured debts in a few months; Chapter 13 spreads repayment over three to five years while you keep your property. Which fits depends on your income, assets, and whether you are behind on a mortgage or car loan.
Key takeaways
- Chapter 7 (liquidation): debts discharged in 3–6 months; a trustee can sell nonexempt property.
- Chapter 13 (repayment plan): keep your property, pay creditors from income over 3–5 years.
- Qualification: Chapter 7 needs a passed means test; Chapter 13 needs regular income.
- Home decider: Chapter 13 cures missed mortgage payments; Chapter 7 cannot.
- Credit reports: Chapter 7 up to 10 years, Chapter 13 generally 7 years.
Chapter 7 vs Chapter 13 at a glance
Both chapters are filed in federal bankruptcy court, both trigger the automatic stay, and both end in a discharge. The route differs: Chapter 7 sells unprotected property and discharges the rest quickly; Chapter 13 reorganizes debts into a plan paid over years.
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Type | Liquidation | Repayment plan |
| Timeline | About 3–6 months | 3–5 years |
| Keep property? | Only exempt property | Yes, if the plan is paid |
| Catch up arrears? | No | Yes, through the plan |
| Qualification | Means test | Regular income + debt caps |
| Credit report | Up to 10 years | Generally 7 years |
Who qualifies: the means test vs regular income
Chapter 7 is built for filers whose income cannot realistically repay their debts. Below your state median income for your household size, you pass the means test at the first step. Above the median, a second calculation subtracts allowed expenses; if enough disposable income remains, Chapter 7 is presumed abusive and closed off absent special circumstances. The U.S. Trustee Program publishes the median figures.
Chapter 13 has no means test and no income ceiling, but it demands steady income large enough to fund a plan paying priority debts in full and giving unsecured creditors at least what a Chapter 7 liquidation would. Debt ceilings apply too: on the filing date, unsecured debts must be under $526,700 and secured debts under $1,580,125, under the Chapter 13 eligibility rules published by the U.S. Courts.
What happens to your home and car
This usually settles the choice. In Chapter 7, a trustee can sell property not protected by an exemption, which varies by state. If your home equity is fully covered by your state homestead exemption and the mortgage is current, you can keep the house. But if you are behind, Chapter 7 offers no way to catch up: the stay pauses foreclosure only temporarily.
Chapter 13 was built for that problem. Missed mortgage and car payments are folded into the plan as arrears and repaid over three to five years while regular payments continue. A home with equity above the exemption is also safe: you pay creditors the nonexempt value. The trade-off is duration: both payments must stay current for years.
Which debts are discharged — and which survive
Both chapters discharge the same core unsecured debts: credit card balances, medical bills, personal loans, old utility bills, and unpaid rent. Chapter 13 goes slightly further: a few debts that survive Chapter 7, such as debts for willful injury to property, can be discharged there.
Some debts survive either chapter: child support and alimony, most student loans, recent income taxes, and debts incurred by fraud. The difference is what happens next. In Chapter 7 those debts remain after discharge. In Chapter 13, priority debts like support and recent taxes are paid in full through the plan.
Timeline: months vs years
A typical Chapter 7 case runs three to six months from filing to discharge, and most of that is waiting: the meeting of creditors usually happens within weeks, and discharge follows about two months later if nobody objects.
Chapter 13 is a multi-year commitment. Below-median filers may qualify for a three-year plan; above-median filers commit to five. A trustee collects one monthly payment and distributes it, and major moves like new debt usually need court approval. The risk is real: many Chapter 13 cases never reach discharge, because income drops or payments become unaffordable.
Credit report: 10 years vs 7 years
Chapter 7 stays on your credit report for up to 10 years from filing, while a completed Chapter 13 drops off after 7 years, according to Experian guidance on the two chapters. The clock starts at filing, not discharge, so a five-year plan entry may clear about two years after discharge.
The chapter matters less than what you do after it. Score damage is steepest in the first year or two, then fades. A Chapter 7 filer rebuilding for two years can look stronger than a Chapter 13 filer still mid-plan.
Which chapter fits your situation?
Work through these questions in order:
- Behind on a mortgage or car loan you want to keep? Chapter 13 is your only route: Chapter 7 cannot cure arrears.
- Do you pass the means test? Below-median income, or no meaningful disposable income, makes Chapter 7 available: faster and cheaper.
- Nonexempt property worth protecting? A home with equity above your exemption, or a paid-off vehicle, points to Chapter 13.
- Steady income for years? Chapter 13 only works if the plan payment stays affordable throughout.
- Big nondischargeable debts? Back taxes or support arrears you want repaid in an orderly way favor Chapter 13.
If most answers point the same way, that chapter is your fit. If they split, get legal advice first.
What filing costs, briefly
Court filing fees are $338 for Chapter 7 and $313 for Chapter 13, per the U.S. Courts fee schedule: a small gap next to attorney fees, which run higher for Chapter 13. Our guide to how much it costs to file bankruptcy breaks down the full totals, and what happens if you file for bankruptcy walks through the process. If bankruptcy is not the right tool at all, debt relief programs may settle debts without a court filing.
This article is general information only and is not legal or financial advice. Bankruptcy law and exemptions vary by state: consult a licensed bankruptcy attorney in your state before filing.