The difference between Chapter 7 and Chapter 13 bankruptcy comes down to liquidation versus repayment: Chapter 7 erases most unsecured debts in about four to six months by letting a trustee sell any non-exempt property you own, while Chapter 13 keeps your property intact and puts you on a court-approved repayment plan that lasts three to five years. Which one you can file, and which one actually fits, depends on your income, what you own, and the kinds of debt you are trying to deal with.
Liquidation vs. Repayment
Chapter 7 is a liquidation. A court-appointed trustee gathers your non-exempt property, sells it, and pays creditors from the proceeds.1Office of the Law Revision Counsel. 11 U.S. Code 704 – Duties of Trustee When it’s done, the court issues a discharge order that ends your personal liability for qualifying debts. Most individual Chapter 7 cases are “no-asset” cases, meaning the trustee finds nothing worth selling and creditors get nothing.2United States Courts. Chapter 7 Bankruptcy Basics
Chapter 13 does not sell anything. You propose a plan that dedicates part of your income to creditors over three to five years, keep your home and vehicles, and receive a discharge of remaining qualifying balances once you finish the payments.3United States Courts. Chapter 13 Bankruptcy Basics That structure is what makes Chapter 13 useful for people who have fallen behind on a mortgage or car loan and need time to catch up without losing the collateral.
Who Qualifies for Each Chapter
The Chapter 7 Means Test
Chapter 7 is for people who genuinely can’t repay. The means test compares your household income over the previous six months to the median income for a household of the same size in your state.4United States Department of Justice. Means Testing Below the median, you pass. Above it, a second calculation subtracts allowable living expenses to see whether you have enough disposable income to fund a repayment plan. Failing that second step doesn’t shut you out of bankruptcy; it usually just points you to Chapter 13.
Chapter 13 Income and Debt Limits
Chapter 13 has no income ceiling, which is why higher earners who can’t use Chapter 7 end up there. You do need regular income sufficient to make plan payments, and your debts must sit within statutory limits. As of April 2025, that means less than $526,700 in unsecured debt and less than $1,580,125 in secured debt.5Office of the Law Revision Counsel. 11 U.S. Code 109 – Who May Be a Debtor These figures are adjusted periodically for inflation.
Income also sets the length of your plan. Filers below the state median for their household size can propose three years. Filers at or above the median generally commit to five.
What Happens to Your Property
Property is where the two chapters split most sharply. In Chapter 7, everything you own gets sorted as exempt or non-exempt. Exempt property is what the law lets you keep, typically a set amount of home equity, a vehicle up to a certain value, retirement accounts, clothing, and household goods. The trustee can seize and sell anything outside those exemptions. The specific amounts depend on whether your state uses its own exemption system or the federal set.
Most Chapter 7 filers protect everything they own through exemptions, and the trustee ends up filing a no-asset report.2United States Courts. Chapter 7 Bankruptcy Basics The people most at risk of losing something are those with substantial real estate equity, valuable collections, or second homes.
Chapter 13 lets you keep it all. Nothing gets sold. The trade-off is that your plan must pay unsecured creditors at least as much as they would have received if your non-exempt assets had been liquidated in Chapter 7.6Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan This “best interest of creditors” test ensures no one loses ground because you chose repayment over liquidation.
Which Debts Get Wiped Out
Chapter 7 Discharge
Chapter 7 discharges most unsecured debts: credit cards, medical bills, personal loans, and similar obligations. The discharge typically arrives about 60 days after the first meeting of creditors, which itself is scheduled 20 to 60 days after filing.7United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
Several categories survive. Domestic support like child support and alimony, most recent tax debts, student loans (unless you prove undue hardship in a separate court proceeding), debts from fraud, and criminal fines or restitution are not discharged.8Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge Debts from willful and malicious injury to a person or property also survive, as do divorce-related property settlement obligations.
The Broader Chapter 13 Discharge
Chapter 13’s discharge reaches a bit further. Debts that survive a Chapter 7 case but can be wiped out through a completed Chapter 13 plan include debts for intentional property damage (as opposed to injury to a person), debts incurred to pay off non-dischargeable taxes, and property settlement obligations from a divorce.3United States Courts. Chapter 13 Bankruptcy Basics This is sometimes called the “super discharge,” and it only applies once you finish all plan payments.9Office of the Law Revision Counsel. 11 USC 1328 – Discharge
Student loans, child support, alimony, recent taxes, and criminal restitution stay non-dischargeable in both chapters. Chapter 13 does let you spread the non-dischargeable balances across the life of the plan while creditors are held off from other collection actions.
Chapter 13’s Tools for Saving a House, a Car, and a Co-Signer
Curing Mortgage and Vehicle Arrears
One of Chapter 13’s strongest features is the ability to cure defaults on secured debts. If you have fallen behind on your mortgage, you can fold the missed payments into the repayment plan and catch up over three to five years while keeping the house.3United States Courts. Chapter 13 Bankruptcy Basics The same works for car loans. Chapter 7 offers no equivalent. In a Chapter 7 case, you either keep paying, surrender the property, or negotiate a reaffirmation agreement with the lender.
Chapter 13 also allows “lien stripping” in certain situations. If you have a second mortgage on your home and the balance on your first mortgage exceeds the home’s current market value, the second mortgage can be reclassified as unsecured debt and any remaining balance is discharged when you complete the plan. Chapter 7 does not offer this.
The Automatic Stay and Co-Signer Protection
Filing under either chapter triggers the automatic stay, which halts lawsuits, wage garnishment, foreclosure, repossession, and creditor calls.10Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The mechanic is identical; the duration is not. In Chapter 7 the stay lasts only the few months the case runs. In Chapter 13 it can shield you for the entire three to five years of the plan, which is a major reason people facing foreclosure prefer Chapter 13.
Chapter 13 adds a co-debtor stay that keeps creditors from pursuing anyone who co-signed a consumer loan with you while your case is active.11Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor It applies to consumer debts only, not business obligations. Chapter 7 has no co-signer protection. If you file Chapter 7, your co-signer stays fully on the hook and creditors can go after them right away.
Timeline, Cost, and Credit
Chapter 7 is fast. From filing to discharge usually runs four to six months. Chapter 13 runs three to five years by design, because that is the plan.
The court filing fee is $338 for Chapter 7 and $313 for Chapter 13. Chapter 7 filers who can’t cover the fee upfront can request installments or, in cases of true inability to pay, a full waiver. Chapter 13 filers can roll the filing fee into the plan. Attorney fees are separate and generally larger: roughly $1,000 to $2,500 for Chapter 7, and more for Chapter 13 because of the plan work, though Chapter 13 fees typically get folded into plan payments so less comes out of pocket at the start.
Either filing can sit on your credit report for up to 10 years from the filing date.12Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports In practice the major bureaus generally remove a Chapter 13 filing after seven years and a Chapter 7 after ten, reflecting the fact that a Chapter 13 filer spent years paying creditors while a Chapter 7 filer did not. The initial score drop is significant either way, but responsible use of a secured card or small installment loan after discharge can move a score from poor back into fair territory within roughly 12 to 18 months.
How to Choose
The choice usually comes down to what you earn, what you own, and what you need the bankruptcy to do. Chapter 7 fits when your income is below the state median, you have little or no non-exempt property, and your main goal is to eliminate unsecured debt quickly. If you pass the means test and most of your debt is credit cards and medical bills, Chapter 7 is the simpler path.
Chapter 13 fits when you have property worth protecting, especially a home with equity or a financed vehicle you want to keep. It is also the right call if you are behind on the mortgage and need time to catch up, if you have co-signers you want to shield, or if you earn too much for Chapter 7. The longer timeline is the price of keeping property and getting the broader discharge.
One scenario trips people up: you may qualify for Chapter 7 on paper and still be better off in Chapter 13. If your home equity exceeds the exemption limit, a Chapter 7 trustee could sell the house. Filing Chapter 13 lets you keep it and pay creditors through the plan instead. The means test tells you what you are eligible for, not what you should pick.
If You Have Filed Bankruptcy Before
If you’ve filed before, the law imposes waiting periods before you can receive a discharge in a new case, measured from the filing date of the earlier case:
- Chapter 7 after a prior Chapter 7: eight years.
- Chapter 13 after a prior Chapter 7: four years.
- Chapter 13 after a prior Chapter 13: two years.
- Chapter 7 after a prior Chapter 13: six years, unless you paid 100% of unsecured claims in the prior plan, or paid at least 70% in good faith with your best effort.
You can file a new case before these periods expire, but the court will not grant a discharge. Some people file anyway to get the automatic stay, though courts can limit the stay’s duration for repeat filers.