Choosing between Chapter 7 and Chapter 13 bankruptcy comes down to two questions: do you qualify for Chapter 7, and do you have property or secured debts you need to protect? Chapter 7 wipes out most unsecured debt in four to six months but can require giving up non-exempt property. Chapter 13 lets you keep everything you own and repay some or all of your debts over three to five years. Neither is universally better. The right filing depends on your income, what you own, the kind of debt you carry, and whether you need to stop a foreclosure or repossession.
What Each Chapter Actually Does
Chapter 7 is a liquidation. A court-appointed trustee reviews everything you own, sells any property that isn’t 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, meaning credit card balances, medical bills, personal loans, and similar obligations legally go away. In practice, most Chapter 7 cases are “no-asset” cases because everything the debtor owns fits within an exemption. Start to finish, the process usually takes four to six months.2United States Courts. Chapter 13 – Bankruptcy Basics
Chapter 13 is a reorganization. Rather than liquidating anything, you propose a repayment plan and send one monthly payment to a trustee, who distributes the money to your creditors.2United States Courts. Chapter 13 – Bankruptcy Basics The plan runs three to five years depending on your income, and remaining qualifying unsecured debts are discharged at the end. You keep your house, your car, and everything else so long as you stick to the plan. If you’re behind on a mortgage, Chapter 13 lets you spread the missed payments across the plan while you continue paying the regular monthly amount going forward. That single feature is why Chapter 13 is the standard tool for homeowners trying to stop a foreclosure.
Who Qualifies
The Chapter 7 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 Below the median, you pass and can file.
Above the median, a second calculation applies. Certain allowed expenses are subtracted from your income to see how much disposable income remains. If the leftover amount is too low for meaningful repayment, you can still qualify. If it shows you could pay creditors a reasonable amount, the court presumes Chapter 7 would be an abuse of the system, and you’ll likely be pushed into Chapter 13 instead.4Office of the Law Revision Counsel. 11 US Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
Chapter 13 Income and Debt Limits
Chapter 13 requires a regular income source large enough to fund a plan. It also has debt 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 thresholds returned. Above those numbers, Chapter 13 isn’t available and Chapter 11 becomes the reorganization option.
Both chapters require a credit counseling session with an approved nonprofit within 180 days before filing, plus a debtor education course after filing but 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 Skipping either one gets the case dismissed.
What You Keep and What You Give Up
This is where the two chapters diverge most sharply. In Chapter 13, you keep all your property, full stop, provided you complete the plan. In Chapter 7, exemptions decide what’s off-limits to the trustee and what can be sold.
Federal law provides a set of exemptions, but roughly two-thirds of states have opted out and require filers to use state-specific exemptions instead. Where you’ve lived for the two years before filing determines which set applies. 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
- Up to $31,575 of equity in your primary residence (homestead)
- Up to $5,025 of equity in one motor vehicle
- Up to $800 per item and $16,850 total in household goods, clothing, and appliances
- A wildcard of $1,675 in any property, plus up to $15,800 of any unused homestead exemption
- Pension plans and IRAs, protected for all filers, even in states that have opted out of the federal exemptions
These figures reflect equity, meaning value minus any loans secured by the property. If you owe $280,000 on a home worth $300,000, you have $20,000 of equity, which fits inside the federal homestead exemption. State exemptions vary widely, with some offering unlimited homestead protection and others capping it well below the federal number. Married couples filing jointly can generally double the amounts.
Exemptions still matter in Chapter 13, but indirectly: they affect how much your repayment plan must pay to unsecured creditors. You don’t lose the property either way.
Debts That Bankruptcy Won’t Erase
Some obligations survive both chapters no matter what you do:
- Child support and alimony are never dischargeable.8Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
- Most student loans stay unless you file a separate lawsuit within your bankruptcy case and prove repayment would cause undue hardship. Department of Justice guidance updated in 2022 made this less burdensome but still requires an adversary proceeding.9United States Department of Justice. Student Loan Guidance
- Recent tax debt survives. Federal income taxes generally must be at least three years old, with timely filed returns, to qualify for discharge.10Internal Revenue Service. Declaring Bankruptcy
- Debts from fraud, misrepresentation, or willful injury survive.
- Criminal fines, restitution, and most court-imposed penalties survive.
Chapter 13 does discharge a somewhat broader range of debts than Chapter 7. Debts for willful damage to someone’s property (as opposed to personal injury), certain government fines unrelated to criminal conduct, and debts arising from a divorce property settlement can sometimes be discharged through a completed Chapter 13 plan but would survive Chapter 7. That broader discharge is one of the less obvious reasons to pick Chapter 13.
Costs and Timeline
Federal filing fees are $338 for Chapter 7 ($245 filing fee, $78 administrative fee, and $15 trustee surcharge) and $313 for Chapter 13 ($235 filing fee and $78 administrative fee).11United States Courts. Bankruptcy Court Miscellaneous Fee Schedule Chapter 7 filers who can’t afford the fee can apply to pay in installments or request a waiver if their income is below 150% of the poverty line. Chapter 13 filers can fold the filing fee into their repayment plan.
Attorney fees are the bigger expense. Chapter 7 representation generally runs between $800 and $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 plan. Many Chapter 13 attorneys are paid through the plan itself, so the full fee isn’t required upfront.
Timelines follow the same pattern. Chapter 7 wraps up in four to six months. Chapter 13 lasts three to five years, and the discharge only comes after the last plan payment clears.
Credit Impact
Under the Fair Credit Reporting Act, credit reporting agencies can include a bankruptcy on your report for up to 10 years from the date the court enters the order for relief.12Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports The Consumer Financial Protection Bureau confirms this maximum applies to both Chapter 7 and Chapter 13.13Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports? Some credit bureaus voluntarily remove completed Chapter 13 cases after seven years as a business practice, but that isn’t required by law. The credit impact is real but temporary; most people see meaningful score improvement within two to three years of discharge if they stay current on new obligations.
How to Decide
The choice usually reduces to a few practical realities.
Chapter 7 fits when your income is at or below your state’s median, you don’t have significant non-exempt assets, and your debt is mostly unsecured. Someone renting an apartment, driving a modest car, and buried under credit card or medical debt is a classic Chapter 7 candidate. It’s faster, cheaper, and eliminates the debt outright.
Chapter 13 fits when you have something to protect. A home with equity above your state’s exemption limit, a car you’re behind on, or a mortgage in arrears all point toward Chapter 13, because the plan lets you cure the arrears over time while keeping the property. Chapter 7 has no mechanism for that: if you’re behind on a mortgage when the case ends, the lender can proceed with foreclosure.
Chapter 13 also handles situations Chapter 7 can’t. If you earn too much to pass the means test, Chapter 13 is the available option. If you have a co-signer on a consumer debt you want to shield, Chapter 13 extends certain protections to co-signers that Chapter 7 does not. If you have non-dischargeable tax debt, Chapter 13 gives you a structured way to pay it off inside the plan. And if your debts fall into those narrower categories that survive Chapter 7 but not Chapter 13 (property-settlement debts from divorce, for example), the broader Chapter 13 discharge is the reason to choose it.
Chapter 7 is often assumed to be the better choice because it’s faster, but a completed Chapter 13 can leave you in a stronger position: mortgage current, car paid off through the plan, and a broader set of debts gone. The right answer depends on what you’re trying to protect and what your income will support.