Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 discharges most unsecured debts in a few months but requires passing a means test and can mean giving up non-exempt property. Chapter 13 is a three- to five-year repayment plan that lets you keep property, catch up on missed mortgage or car payments, and handle some debts Chapter 7 cannot. People with regular income, valuable non-exempt assets or mortgage arrears often choose Chapter 13.
Both chapters stop collection and can end overwhelming debt, but they work very differently.
Side by side
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Basic idea | Liquidation; non-exempt assets can be sold | Repayment plan from future income |
| Length | About 4 months | 3 to 5 years |
| Eligibility | Means test | Regular income; debts under federal limits (11 U.S.C. 109(e)) |
| Keeping a house in default | Hard; foreclosure resumes unless you catch up | Can catch up arrears over the plan (11 U.S.C. 1322) |
| Non-exempt property | May be sold by the trustee | Kept; plan pays its value to creditors |
| Co-signers | Not protected | Protected for consumer debts during the plan |
| Filing fee | $338 | $313 |
| Credit report | Up to 10 years | Commonly removed by credit bureaus after 7 years |
When Chapter 7 is usually better
- Low income that passes the means test
- Mostly unsecured debt such as credit cards and medical bills
- No significant non-exempt property
- No mortgage or car arrears you need to catch up
When Chapter 13 is usually better
- Behind on a mortgage and want to keep the home; arrears are paid over time while regular payments continue
- Behind on a car loan, sometimes with the ability to reduce the balance to the car's value for older loans
- Non-exempt assets you want to keep
- Income too high for Chapter 7
- Debts Chapter 7 cannot discharge but Chapter 13 can treat, such as certain property settlement debts, or priority taxes that can be paid over time
- A prior Chapter 7 discharge within the past 8 years
Downsides of Chapter 13
Most plans last years, and many are dismissed before completion when payments are missed. Life changes such as job loss can derail the plan. See what happens if Chapter 13 is dismissed.
Attorney fees
Chapter 13 fees are usually higher, but much of the fee can be paid through the plan. See bankruptcy lawyer costs.
A bankruptcy lawyer can compare outcomes under each chapter for your situation.
Sources
Find bankruptcy lawyers near you
Thinking about Chapter 7 or Chapter 13 bankruptcy, or facing foreclosure or debt collection? Compare local bankruptcy attorneys by Google rating, reviews and office hours below.
Bankruptcy Lawyers by state
Tap your state to see listings by city.
This article is general legal information, not legal advice, and reading it does not create an attorney-client relationship. Laws differ by state and change over time; talk to a licensed attorney in your state about your situation.