Chapter 7 vs Chapter 13 Bankruptcy: What's the Difference?
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People thinking about filing bankruptcy are most often considering either chapter 7 bankruptcy or chapter 13 bankruptcy. The chapter that makes the most sense for you will depend on your specific financial picture and goals.
Income and assets are usually the two main factors that will influence your decision. Income because you must take a means test before you file either chapter. The means test determines whether you qualify for chapter 7 bankruptcy, and how much certain creditors will need to be paid in chapter 13. If your income is too high, chapter 7 won't be available to you and you would only have chapter 13 available to you. Assets matter because chapter 7 may require you to give up non-exempt property, while chapter 13 allows you to keep your property by paying its value over time through a repayment plan.
Those who qualify for chapter 7 may also be able to file for chapter 13 if their income is enough to make chapter 13 plan payments. Chapter 7 qualifiers may opt for chapter 13 for several reasons (which we will discuss below).
Choosing between chapter 7 and chapter 13 is not just about preference. Eligibility rules matter, especially when it comes to income. In many cases, someone looking at chapter 7 must complete the means test, which measures household income against state median figures for a household of the same size. A lower income may support chapter 7 eligibility, while a higher income usually calls for a closer review of the numbers. The U.S. Department of Justice explains the means test in more detail on its website.
Legal Sources: The law behind chapter 7 and chapter 13 is found in 11 U.S. Code Chapter 7 and 11 U.S. Code Chapter 13.
Chapter 7 vs Chapter 13 Decision Tool
We made the chapter 7 vs chapter 13 decision tool below to help you on your journey to finding the best solution for your specific situation. This tool is free to the public. We do not ask for any contact information. You won't be asked for email, phone number, etc. at the end of the form.
Simply answer the questions below about income, debt and your goals. At the end you will get a summary of which chapter might be a better fit based on your input, broken down into three categories (income, your goals, and your assets). You can save and print your results if you want to keep them for your records, or if you want to share the info with a bankruptcy lawyer.
Please remember that the chapter 7 vs chapter 13 decision tool is an educational tool. You shouldn't rely on it as any sort of legal advice.
Chapter 7 vs Chapter 13 Decision Tool
Answer the questions below to see whether chapter 7 or chapter 13 appears to be the better fit based on your income, goals, and asset-protection needs.
Step 1 of 2
Window 1 of 2: Income Snapshot
ZIP lookup is optional and used as a quick state check.
Chapter 7 vs Chapter 13 Bankruptcy
The table highlights some of the main differences between chapter 7 and chapter 13 bankruptcy for individuals and couples (joint filers).
| Category | Chapter 7 | Chapter 13 |
|---|---|---|
| Typical Timeline | Approximately 3–6 months from filing to discharge (varies by case) | Discharge entered after 3 to 5 year payment plan |
| Eligibility Gate | Must qualify under the means test | Must have regular income & be within current debt limits |
| Unsecured Debt (Credit Cards, Medical Bills) | Dischargeable. No payment plan required. | Dischargeable after 3 to 5 years. Some or all could be paid through payment plan. |
| Mortgage Arrears | There is no way to catch up mortgage arrears. | Mortgage arrears can be cured through the plan. |
| Car Loans | Car loans can be kept by staying current, reaffirming, or redeeming (depends on lender and facts). | Vehicle arrears can be cured. In some cases, loan terms may be adjusted and/or "crammed down" . |
| Non-Exempt Property | Property without an exemption is subject to sale or settlement. | Property without an exemption can generally be kept by paying its value to creditors through the plan. |
| Co-Signer Protection | Does not provide ongoing protection for non-filing co-signers | Includes a limited co-debtor stay for certain consumer debts during the case |
| Credit Reporting | Bankruptcy notation may remain on credit reports for up to 10 years. | Bankruptcy notation may remain on credit reports for up to 7 years. |
When Chapter 7 Could Be a Better Option Than Chapter 13
Below are examples of scenarios where chapter 7 might be a better option than chapter 13:
You Own Few Assets and Most of Your Debt Is Unsecured
Chapter 7 may be a stronger option for someone with limited property and a large amount of unsecured debt. For instance, a person who rents a home, owns basic personal belongings, drives an older car, and is falling behind on credit cards, medical expenses, or unsecured loans may find that chapter 7 offers more meaningful relief.
You Do Not Have Enough Income to Support a Repayment Plan
Chapter 7 may make more sense when there is not enough income left over each month to fund a chapter 13 plan. Some people are already stretched thin trying to cover housing, food, utilities, transportation, and other necessary expenses. When the budget does not realistically allow for a monthly plan payment, chapter 7 may be the more practical path.
You Have Limited Income and Minimal Property
Chapter 7 may be a good fit for someone with low income, little property, and few resources available to deal with debt. For a person who is unemployed or bringing in very little each month, chapter 7 can offer a way to eliminate qualifying debt and move toward a fresh financial start.
You Want Relief From Debt Sooner
Chapter 7 may be the better choice when the priority is to eliminate unsecured debt in a shorter amount of time. Someone dealing with heavy credit card balances, medical bills, or older personal loans may prefer chapter 7 because the path to discharge is usually much quicker than it is in chapter 13.
When Chapter 13 Could Be a Better Option Than Chapter 7
Below are a few scenarios where chapter 13 could be a better option than chapter 7:
You Need to Catch Up on Missed Mortgage Payments
If you are behind on your mortgage payments for your primary residence, want to keep that home and need a way to catch up the mortgage arrears, chapter 13 provides a path where you can pay them back through the 3 to 5 year plan. Chapter 13 can also be used to stop a foreclosure if those house payments have gotten too far behind and your lender is taking foreclosure actions.
The usual action taken here would be to file the case before the foreclosure date, properly give notice of the chapter 13 case to the mortgage lender, and file a chapter 13 plan that provides the mortgage lender with the missed mortgage payments. Usually you will also have to remain current with on-going mortgage payments while you are in your chapter 13 plan for this to work.
You Need to Catch Up on Missed Car Payments
If you are behind on your vehicle's payments and need a way to catch them up, you can use your chapter 13 plan payments to do that.
You Need to Protect Property That Might Be at Risk in Chapter 7
If you have property that is not exempt which would be at risk for sale in a chapter 7 liquidation, you could file a chapter 13 and provide payment to creditors for that nonexempt asset in your chapter 13 plan.
Example.Assume you have a recreational vehicle like an RV or boat that has no exemption. In a chapter 7, the trustee could sell this asset and use the proceeds to pay creditors. In a chapter 13, you could keep the asset by paying its value to creditors through your plan payments over time.
You Want to Protect a Co-Debtor
If you have a co-debtor, like a friend family member, or former spouse, who is also obligated on a debt, chapter 13 can protect them from collection actions for some consumer debts during the case through a limited co-debtor stay. Chapter 7 does not provide this protection.
Final Thoughts: Chapter 7 or Chapter 13?
As you can see from our discussion and use of the chapter 7 vs chapter 13 tool, the chapter that works for you is always going to be based on your specific situation and what your goals are. There is no one-size-fits-all analysis when it comes to chapter 7 vs chapter 13. The best way to get clear answers is to do your research, and it get good, qualified legal guidance from a bankruptcy lawyer if you unsure. At the end of the day when it comes to your finances there is a lot at stake.
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