Both are personal bankruptcy options — but they work very differently. Here's what to think about before you decide which fits your situation.
| Factor | Chapter 7 | Chapter 13 |
|---|---|---|
| Type | Liquidation | Reorganization / repayment plan |
| Duration | About 4 to 6 months | 3 to 5 years |
| Property | Non-exempt property may be sold by a trustee | You keep all property |
| Income requirement | Must pass the "means test" | Must have regular, stable income |
| Debts | Most unsecured debts eliminated | Debts repaid through a plan |
| Mortgage arrears | Usually cannot cure defaults | Can cure defaults and keep the home |
| Credit report | Up to 10 years | Up to 7 years |
General information only — not legal advice. Every case is different. Consult a licensed attorney about your specific situation.
If non-bankruptcy options aren't feasible, most consumers must choose between Chapter 7 and Chapter 13. These six factors usually determine which fits better.
There are about 17 classes of debts that cannot be discharged under Chapter 7. Under Chapter 13, debts like alimony, child support, drunk-driving injury claims, criminal fines, most student loans, and debts not covered by the plan are also not dischargeable. If you have substantial debts that can be handled under Chapter 13 but cannot under Chapter 7, Chapter 13 may be the better path.
Also note: if you received a Chapter 7 discharge within the last 6 years, you are not eligible for another Chapter 7 discharge — but you may be eligible for Chapter 13.
If you're behind on an important secured loan — like a home mortgage or a car loan — Chapter 13 usually lets you catch up on the missed payments over time and keep the property. Chapter 7 generally does not allow this. Under Chapter 7, you may be able to redeem or remove certain liens on exempt personal property, but curing a mortgage default is rarely feasible.
Under Chapter 7, you must turn over all non-exempt property (or its cash value) to the trustee. Under Chapter 13, you are usually allowed to keep your non-exempt property, as long as you make meaningful payments to unsecured creditors through the plan. If you have significant equity in a home or other important assets, Chapter 13 is often preferable.
To qualify for Chapter 13, you must have "regular income" — income stable and reliable enough to make monthly plan payments. If you're unemployed or lack regular income, Chapter 13 may not be feasible.
On the other side: if your income is high enough to repay a significant portion of your debts, a Chapter 7 case may be dismissed as an abuse of the bankruptcy system. In that case, Chapter 13 is often the correct route.
If you sincerely want to repay most or all of your unsecured debts, Chapter 13 is usually the better fit. If you only want to repay one or two specific debts, the common approach is to file Chapter 7 and then reaffirm those debts individually.
If your goal is a fast, low-cost fresh start — discharging your debts and moving on as quickly as possible — Chapter 7 is often the right choice.
Chapter 13 cases normally last 3 to 5 years, with discharge granted at the end. Chapter 7 cases for typical consumers last about 6 months, with discharge about 4 months after filing.
Chapter 13 also involves higher administrative costs and ongoing obligations. If you're unable or unwilling to make plan payments for the full duration — or if something may happen during that time that would reduce your ability to pay — Chapter 13 may not be in your best interest.
Filing bankruptcy is stressful. The decision about whether to use an attorney should be taken seriously — you will have many questions throughout the process, and mistakes can have long-term consequences.
There is absolutely no reason to feel guilty about filing bankruptcy — especially if you use it as an opportunity to build future financial security for your family.
Many successful people have gone through bankruptcy and gone on to achieve great things in their fields. Your financial problems are serious — but they are not the end of the world. For many people, bankruptcy is the beginning of a new chapter in financial freedom.
Call us. We'll help you understand the forms — you make the decision.