Chapter 7 vs. Chapter 13 Bankruptcy: Key Differences

Short answer

Chapter 7 sells nonexempt property to pay creditors and usually wraps up within a few months. Chapter 13 lets you keep your property and repay debts through a three- to five-year plan, which can help you catch up on a mortgage. The right fit depends on your income, assets and the kinds of debt you owe.

How are Chapter 7 and Chapter 13 different?

Both are forms of personal bankruptcy under the federal Bankruptcy Code, but they work in very different ways:

• Chapter 7 (liquidation): a trustee sells property that isn't protected by an exemption and distributes the money to creditors. If everything you own is exempt or covered by valid liens, there is usually nothing to distribute, according to the U.S. Courts Chapter 7 overview.
• Chapter 13 (repayment plan): you propose a plan to repay all or part of your debts in installments over three to five years, and you generally keep your property, according to the U.S. Courts Chapter 13 overview.

Under either chapter, you must receive credit counseling from an approved agency within 180 days before you file, with limited exceptions described in those same overviews.

Who qualifies for Chapter 7 or Chapter 13?

Chapter 7 and the means test

If your "current monthly income" (your average over the six calendar months before filing) is above your state's median for your household size, you must complete a means test to determine whether a Chapter 7 filing is presumed abusive, as the U.S. Courts Chapter 7 overview explains. The U.S. Trustee Program publishes the medians and expense standards; updated medians apply to cases filed on or after April 1, 2026, and IRS standards to cases filed on or after July 15, 2026.

Chapter 13 and the debt limits

Chapter 13 is for individuals with regular income, including the self-employed. For cases filed on or after April 1, 2025, unsecured debts must be less than $526,700 and secured debts less than $1,580,125, based on the adjustment published under 11 U.S.C. §104 and the U.S. Courts Chapter 13 overview. These limits are adjusted every three years.

Can I keep my house and car?

• In Chapter 7, you keep property covered by exemptions. Bankruptcy doesn't erase a lien, so a lender can still repossess or foreclose if you stop paying. To keep a financed car, you can sign a reaffirmation agreement before the discharge is entered, which means you stay personally liable for that loan, per the Chapter 7 overview.
• In Chapter 13, the automatic stay halts a foreclosure as soon as you file, and you can catch up on missed payments over the life of the plan. You must still make every mortgage payment that comes due during the case on time, per the Chapter 13 overview.

What counts as exempt depends heavily on state law: some states require you to use their own exemptions, while others let you choose between federal and state exemptions. In Puerto Rico, the federal bankruptcy court has recognized that debtors may choose between the federal exemptions and those under Puerto Rico law, such as the homestead exemption, in an opinion from the U.S. Bankruptcy Court for the District of Puerto Rico.

How long does each chapter take, and what does filing cost?

Chapter 7

1. The meeting of creditors takes place 21 to 40 days after you file.
2. If no one objects, the court usually grants the discharge 60 to 90 days after the date first set for that meeting.
3. The filing fee is $245, plus a $78 administrative fee and a $15 trustee surcharge.

Sources: the Chapter 7 overview and the bankruptcy court fee schedule, effective December 1, 2023.

Chapter 13

1. You file your plan with the petition or within 14 days.
2. You start paying the trustee within 30 days, even before the plan is approved.
3. The meeting of creditors is held 21 to 50 days after filing, and the confirmation hearing no later than 45 days after that meeting.
4. The plan lasts three years if your income is below the state median (unless the court approves a longer period for cause) and generally five years if it's above. It can never exceed five years.
5. The filing fee is $235, plus the $78 administrative fee.

Sources: the Chapter 13 overview and the bankruptcy court fee schedule. In both chapters, the court may let you pay fees in up to four installments.

Which debts are wiped out, and which aren't?

A discharge ends your personal obligation to pay many debts, but not all of them. Chapter 7 does not discharge, among others, alimony and child support, certain taxes, most government-funded or guaranteed education loans, debts from drunk-driving injuries or deaths, and certain criminal restitution orders, according to the Chapter 7 overview.

The Chapter 13 discharge is somewhat broader. It can cover, for example, debts for willful and malicious injury to property (as opposed to a person) and debts from property settlements in a divorce, per the Chapter 13 overview. Chapter 13 also has a special stay that protects co-debtors on consumer debts.

To receive a discharge under either chapter, you must complete an approved personal financial management course, under 11 U.S.C. §727(a)(11) and §1328, subject to exceptions.

How long do I have to wait between bankruptcy filings?

The waiting periods run between the filing dates of the two cases:

• Chapter 7 after Chapter 7: no discharge if you received one in a case filed within the previous 8 years (11 U.S.C. §727(a)(8)).
• Chapter 7 after Chapter 13: 6 years, unless your earlier plan paid 100% of allowed unsecured claims, or at least 70% under a good-faith, best-effort plan (§727(a)(9)).
• Chapter 13 after Chapter 7: 4 years (11 U.S.C. §1328(f)).
• Chapter 13 after Chapter 13: 2 years (§1328(f)).

Is Chapter 7 or Chapter 13 worse for my credit?

Federal law allows a bankruptcy case to appear on your credit report for up to 10 years from the order for relief, with no distinction between chapters, under the Fair Credit Reporting Act, 15 U.S.C. §1681c. Credit bureaus may choose to report it for less time, but the law does not require a shorter period for Chapter 13.

Can I switch chapters after I file?

Yes, within limits. You can convert a Chapter 13 case to Chapter 7 at any time, and that right can't be waived (11 U.S.C. §1307(a)). You can also convert a Chapter 7 case to Chapter 13 if the case hasn't already been converted and you qualify for Chapter 13 (11 U.S.C. §706).

When should you talk to a lawyer?

Talk to a bankruptcy attorney if:

• Your home is in foreclosure or your wages are about to be garnished.
• Your income is close to your state's median and you're not sure you'd pass the means test.
• You own property with real value, such as home equity, savings or a business, and don't know whether it's exempt.
• You've filed for bankruptcy before, or you owe taxes, support obligations or student loans.

A lawyer can review your situation and walk you through your options; no one can guarantee an outcome. Learn more about our bankruptcy relief services.

FAQ

Which is worse, Chapter 7 or Chapter 13?

Neither is worse across the board. Chapter 7 is faster but can cost you nonexempt property; Chapter 13 takes years of payments but can help you keep your home. It depends on your circumstances.

What assets do you lose in Chapter 7?

Only property that isn't protected by federal, state or Puerto Rico exemptions. The trustee may sell it to pay creditors.

What is the downside of filing Chapter 13?

You commit to a three- to five-year plan and must keep up with both plan payments and ongoing mortgage payments. If you fall behind on mortgage payments that come due after filing, you could lose the home.

Can I file Chapter 7 if my income is above the median?

Possibly, but you'll have to complete the means test. If the result creates a presumption of abuse, you can rebut it only by showing special circumstances.

Does bankruptcy wipe out student loans?

Usually not. Most government-funded or guaranteed education loans aren't discharged under either chapter. Ask a lawyer whether any exception could apply to you.

This article provides general information and is not legal advice. Rules can vary by state and in Puerto Rico; talk to a lawyer about your specific situation.