The federal Bankruptcy Code offers four main chapters, and the difference between bankruptcy chapters comes down to who qualifies, what happens to your property, how long the process takes, and what it costs. Chapter 7 liquidates non-exempt assets and wipes out most unsecured debt in a few months. Chapter 13 lets you keep your property and repay creditors on a three-to-five-year plan. Chapter 11 restructures a business (or an individual with debts too high for Chapter 13) while operations continue. Chapter 12 does the same kind of reorganization but is built around the seasonal income of family farmers and commercial fishermen.
Quick Comparison of the Four Chapters
- Chapter 7: Liquidation for individuals (and some businesses) who pass the means test. Non-exempt property is sold; most unsecured debt is discharged. Four to six months. Filing fee $338.
- Chapter 13: Repayment plan for individuals with regular income and debts under set limits. You keep your property. Three to five years. Filing fee $313.
- Chapter 11: Reorganization, mostly for businesses and high-debt individuals. The debtor usually stays in control. No fixed timeline. Filing fee $1,738 plus quarterly trustee fees.
- Chapter 12: Reorganization for family farmers and fishermen with seasonal income. Three to five years. Filing fee $278.
Each chapter is explained in more detail below.
Chapter 7: Liquidation
Chapter 7 is the most common consumer bankruptcy. A court-appointed trustee reviews what you own, sells any non-exempt assets, and distributes the proceeds to creditors. In return, you receive a discharge that permanently eliminates most unsecured debts. The case typically wraps up in four to six months, which makes it the fastest route through the system.1United States Courts. Chapter 7 – Bankruptcy Basics
Who Qualifies: The Means Test
Eligibility turns on the means test, which compares your average monthly income over the prior six months to the median income for a household your size in your state.2United States Department of Justice. Means Testing Below the median, you pass automatically. Above it, the test looks at allowable expenses to decide whether you have enough disposable income to fund a repayment plan. If the numbers show you could meaningfully repay creditors, the court can dismiss the Chapter 7 case as abusive and push you toward Chapter 13.3United States Courts. Official Form 122A-1 – Chapter 7 Statement of Your Current Monthly Income
What You Keep
“Liquidation” sounds frightening, but most Chapter 7 filers keep everything they own. Federal and state exemption laws shield certain property from sale. Under the federal exemptions, you can protect a limited amount of home equity, household goods and clothing (subject to per-item and aggregate caps), and other essentials.4Office of the Law Revision Counsel. 11 U.S.C. 522 – Exemptions Most states have their own exemption schemes, and some let you choose between state and federal lists. Vehicle, wildcard, and homestead exemptions vary widely. A handful of states permit unlimited homestead protection; others cap it tightly or offer none. If you acquired home equity within 1,215 days before filing, federal law caps the exemption at $214,000 regardless of state law.
What Gets Discharged, and What Doesn’t
At the end of the case, the discharge order permanently bars creditors from collecting on qualifying debts like credit card balances, medical bills, and personal loans. More than 99% of individual Chapter 7 filers receive a discharge.1United States Courts. Chapter 7 – Bankruptcy Basics Certain debts survive bankruptcy no matter what: child support and alimony, most student loans, recent income taxes, fraud-related debts, DUI-related injury or death, willful and malicious injury, criminal restitution, and most government fines and penalties.5Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge The same list of non-dischargeable debts applies in Chapter 13 with limited differences.
Cost
The Chapter 7 filing fee is $338, broken into a $245 filing fee, a $78 administrative fee, and a $15 trustee surcharge.6Office of the Law Revision Counsel. 28 U.S.C. 1930 – Bankruptcy Fees Filers with income below 150% of the federal poverty guidelines can apply for a full waiver. Installment payments are available otherwise.
Chapter 13: Repayment Plan
Chapter 13 is built for people with regular income who want to reorganize rather than liquidate. Instead of selling property, you propose a plan that routes your disposable income to a trustee for three to five years. The trustee pays creditors according to the Bankruptcy Code’s priority rules, and remaining balances on most unsecured debts are discharged at the end.7Office of the Law Revision Counsel. 11 U.S.C. Chapter 13 – Adjustment of Debts of an Individual With Regular Income
Who Qualifies
Chapter 13 has no income ceiling, which is why many people who fail the Chapter 7 means test end up here. It does cap total debt. After a temporary expansion expired in June 2024, eligibility reverted to a two-part test: unsecured debts under $465,275 and secured debts under $1,395,875.8Office of the Law Revision Counsel. 11 U.S.C. 109 – Who May Be a Debtor Debts above those thresholds push you to Chapter 11.
Keeping Your Home and Car
The biggest draw of Chapter 13 is that you don’t lose your house or car. Homeowners can stop a pending foreclosure and spread missed mortgage payments across the life of the plan. Your plan must pay unsecured creditors at least what they would have received in a Chapter 7 liquidation. The court checks the plan for feasibility before approving it.
Chapter 13 also lets you strip junior liens from your home. If your first mortgage balance exceeds the home’s market value, a second mortgage or home equity line becomes fully unsecured and can be eliminated through the plan. Chapter 7 does not offer this.
Protection for Co-Signers
Filing Chapter 13 triggers a co-debtor stay that protects people who co-signed your consumer debts. If a family member co-signed a car loan or a friend guaranteed a personal loan, creditors generally can’t pursue them while your case is active and your plan proposes to pay the debt.9Office of the Law Revision Counsel. 11 U.S.C. 1301 – Stay of Action Against Codebtor It only covers consumer debts, not business obligations. Chapter 7 has no equivalent protection for co-signers.
Timeline and Cost
The filing fee is $313.6Office of the Law Revision Counsel. 28 U.S.C. 1930 – Bankruptcy Fees Plan length depends on income: below your state’s median, the plan usually runs three years; above it, expect the five-year maximum. Missing payments can lead to dismissal or conversion to Chapter 7.
Chapter 11: Business Reorganization
Chapter 11 lets businesses and high-debt individuals restructure while continuing to operate. By default there’s no trustee running things. The debtor stays in control as a “debtor in possession,” handling daily operations, paying employees, and serving customers. The court steps in for larger moves like selling significant assets or taking on new debt.10Office of the Law Revision Counsel. 11 U.S.C. Chapter 11 – Reorganization A trustee can be appointed where management has committed fraud, shown incompetence, or grossly mismanaged the business, but that’s the exception.
The Plan and the Cramdown Rule
A Chapter 11 case centers on the reorganization plan, which lays out how the debtor will restructure and repay creditors. Before voting, the debtor files a disclosure statement with enough information for creditors to make an informed choice.11Cornell Law Institute. Federal Rules of Bankruptcy Procedure Rule 3016 Creditors whose rights are being altered vote, and the court confirms the plan if it gets enough support and meets legal requirements.
If a class votes no, the court can still confirm the plan through a “cramdown.” The constraint is the absolute priority rule: junior creditors and equity holders get nothing unless every senior class is paid in full or agrees otherwise. In practice, owners often have to buy back their own equity or negotiate concessions.
Subchapter V for Small Businesses
Small businesses with debts of $3,024,725 or less can elect Subchapter V, a streamlined version of Chapter 11 created in 2020. It cuts administrative costs, shortens the deadline for filing a plan, and eliminates the quarterly U.S. Trustee fees that standard Chapter 11 debtors pay.12United States Department of Justice. Subchapter V Small Business Reorganizations A temporary increase had raised the limit to $7.5 million, but that expansion expired in June 2024. For many small business owners, Subchapter V is the difference between an affordable reorganization and a forced liquidation.
Cost
The filing fee for a standard Chapter 11 case is $1,738.13United States Courts. Bankruptcy Court Miscellaneous Fee Schedule Standard Chapter 11 debtors also owe quarterly U.S. Trustee fees based on disbursements. For quarters with less than $1 million in disbursements, the fee is 0.4% of disbursements or $250, whichever is greater. Above $1 million, the rate rises to 0.8%, capped at $250,000 per quarter.14United States Department of Justice. Chapter 11 Quarterly Fees Add attorney and financial advisor fees, and Chapter 11 is by far the most expensive form of bankruptcy. Subchapter V avoids the quarterly fees entirely.
Chapter 12: Farmers and Fishermen
Chapter 12 exists because farming and commercial fishing don’t produce steady monthly paychecks. Income comes in bursts tied to harvests and fishing seasons, which makes a rigid monthly plan unworkable. Chapter 12 blends the reorganization flexibility of Chapter 11 with the lower cost and simpler mechanics of Chapter 13.15Office of the Law Revision Counsel. 11 U.S.C. Chapter 12 – Adjustment of Debts of a Family Farmer or Fisherman With Regular Annual Income
Who Qualifies
You must earn more than half your gross income from farming or fishing. Debt limits are set high to cover expensive land, equipment, and vessels. Family farmers can carry up to $12,562,250 in total debt (with at least 50% arising from the farming operation); family fishermen are capped at $2,568,000 (with at least 80% from fishing).16United States Courts. Chapter 12 – Bankruptcy Basics Those figures apply to cases filed between April 1, 2025 and March 31, 2028. Corporations and partnerships can also qualify if the family owns more than half the equity and the operation meets the same income and debt tests.
Seasonal Payment Flexibility
Repayment plans run three to five years, like Chapter 13. The key difference is that payments can be structured around seasonal income instead of fixed monthly amounts. A wheat farmer might make most plan payments after the fall harvest and minimal payments through winter and spring.16United States Courts. Chapter 12 – Bankruptcy Basics Secured debts with original terms longer than five years, like equipment loans or mortgages, can sometimes continue on their original schedule as long as past-due amounts are brought current during the plan.
Cost
The Chapter 12 filing fee is $278, which combines a $200 filing fee with a $78 administrative fee.6Office of the Law Revision Counsel. 28 U.S.C. 1930 – Bankruptcy Fees That makes it the least expensive bankruptcy option.
What Every Chapter Shares
Whichever chapter you choose, a few things apply across the board.
The moment you file, the automatic stay stops most collection activity: lawsuits, wage garnishments, foreclosure proceedings, repossession attempts, and collection calls.17Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay The stay lasts until the case closes, is dismissed, or the court lifts it for a specific creditor.
Every filer must complete credit counseling with a U.S. Trustee-approved agency within 180 days before filing, and a second course on budgeting and personal financial management after filing but before discharge. Skipping either one blocks the discharge.
Every debtor must attend a meeting of creditors under Section 341 of the Bankruptcy Code. The trustee runs it in Chapter 7, 12, and 13 cases; a representative of the U.S. Trustee runs it in Chapter 11. You answer questions under oath about your income, assets, debts, and financial condition. Creditors are invited but rarely show up in consumer cases.
Waiting Periods Between Filings
Bankruptcy is not a one-time option, but repeat filings have mandatory waits before you can get a new discharge. After a Chapter 7 discharge, you must wait eight years from the original filing date for another Chapter 7 discharge. Switching chapters shortens the gap: after a Chapter 7 discharge, you can file Chapter 13 and receive a discharge after four years.18United States Bankruptcy Court Central District of California. Prior Bankruptcy – How Soon Can I Get Another Discharge Filing early doesn’t necessarily get the case tossed, but it means no discharge, which eliminates the main benefit of filing.
How Each Chapter Affects Your Credit
A Chapter 7 filing stays on your credit report for 10 years from the filing date. Chapter 13 drops off after seven years, measured from the filing date rather than the end of plan payments. That shorter reporting period is one reason some filers who could qualify for Chapter 7 choose Chapter 13 instead. Any filing causes an immediate and significant drop in your credit score, with the impact fading as you rebuild your history.