Chapter 7 vs Chapter 13 Bankruptcy

Bankruptcy sits at the end of the road this site usually writes about. When a payoff order — avalanche, snowball, either one — cannot clear the debts on any realistic budget, the question stops being arithmetic and becomes legal: which chapter of the Bankruptcy Code? In the 12 months ending June 30, 2026, 608,511 bankruptcy cases were filed in the United States, up 12.2% on the year before; 581,570 of them were non-business — household — cases. About 63% of all filers chose Chapter 7 (382,161 cases) and about 35% chose Chapter 13 (215,490), per the Administrative Office of the U.S. Courts. This page compares those two chapters line by line — eligibility, the means test, your property, your home, the debts that survive, the cost and the clock — using the federal courts' own descriptions in Bankruptcy Basics as the source text. It is an explanation of a legal process, not legal advice; the note at the end says who to talk to before filing anything.

The two chapters, side by side

Read the table by its surprises. The court fee — the number most comparisons lead with — is the smallest difference on the page: $25. The differences that decide real cases are the three clocks (months versus years, in the case and on the credit report), the two gates (a test on one side, a pair of ceilings on the other), and the home. The rest of this page takes those one at a time.

Chapter 7: the liquidation chapter

A Chapter 7 case does not involve a repayment plan at all. The court appoints a trustee, and the trustee's job is to gather and sell the debtor's nonexempt assets and distribute the proceeds to creditors in the order the Bankruptcy Code sets out. What makes the chapter survivable for most households is the word "nonexempt." Federal bankruptcy law — and, usually, the law of your state — protects ("exempts") defined categories of property from that sale. Many states have replaced the federal exemption package with their own; a few let the debtor choose between the two. Which is why uscourts.gov puts the point the way it does: whether certain property is exempt, and may be kept, is often a question of state law. The same filing can be safe for a household in one state and costly in another, and no national page — including this one — can tell you your state's answer.

The reassuring statistic, also from the courts: most Chapter 7 cases involving individual debtors are "no asset" cases — everything the debtor owns is either exempt or subject to a lien, the trustee files a no-asset report, and there is nothing to distribute. And excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99% of Chapter 7 cases. The timeline is short and mostly mechanical: the meeting of creditors is held 21 to 40 days after filing, and the discharge order generally issues 60 to 90 days after the date first set for that meeting — which is how a typical case lands at roughly three to four months from filing to discharge. What the discharge does is precise: it releases the debtor from personal liability for the discharged debts and bars creditors from collecting them. What it does not do is just as precise: a discharge does not extinguish a lien. A car loan or mortgage survives as a claim against the property itself, which is why a Chapter 7 filer who wants to keep a car often signs a reaffirmation agreement — voluntarily keeping personal liability for that one debt, under court-supervised disclosures.

The means test: Chapter 7's income gate

Chapter 7 has no debt ceiling, but since 2005 it has had an income gate for people whose debts are primarily consumer debts — the means test. It runs on a defined term: current monthly income, which despite the name is your average monthly income over the six calendar months before filing (with defined inclusions and exclusions, among them Social Security income). The first step is a comparison: if your current monthly income is at or below the median income for a household of your size in your state, the gate is effectively passed. Above the median, the full formula applies — Official Form 122A subtracts statutorily allowed living expenses and secured-debt payments from that income. If what remains, projected over five years, reaches the lesser of $17,150 or the greater of 25% of your nonpriority unsecured debt or $10,275, the filing is presumed abusive, and the presumption can be rebutted only by documented special circumstances. Fail the test and Chapter 7 is generally closed — which is the main route by which a household ends up in Chapter 13 instead. The median-income and expense figures the forms use come from the Census Bureau and the IRS, published through the U.S. Trustee Program. All of the dollar amounts in this section are statutory figures that are adjusted periodically; the ones printed here are those published by uscourts.gov in November 2026.

The same income machinery runs Chapter 13 from the other side. There, your current monthly income decides the commitment period — three years below the median, generally five above it — and your disposable income (income left after amounts reasonably necessary for support, and certain charitable contributions) decides what the plan must pay. One income definition, two jobs: in Chapter 7 it decides whether you may enter; in Chapter 13 it decides how long you stay and what you pay while you are there.

Chapter 13: the wage earner's plan

Chapter 13 is built for a household with regular income whose problem is timing, not totals — behind on a mortgage, facing a garnishment, or over the means-test line. The debtor proposes a plan: fixed payments to a Chapter 13 trustee, who distributes them to creditors. The plan is filed with the petition or within 14 days of it, and payments to the trustee must begin within 30 days of filing, before the plan is even confirmed. The plan's rules are strict, and they are where the chapter's character shows:

• Priority claims are paid in full — most taxes, domestic support obligations, and the costs of the case itself (unless a priority creditor agrees otherwise).
• Unsecured creditors need not be paid in full — credit cards, medical bills, personal loans — provided the debtor commits all projected disposable income across the commitment period, and those creditors receive at least as much as they would have in a Chapter 7 liquidation. That second condition is the quiet link between the chapters: a Chapter 13 plan can never pay unsecured creditors less than Chapter 7 would have.
• Secured debts other than a home mortgage can be rescheduled across the plan, which may lower the payment — a car loan being the standard example.

The commitment-period math is the honest way to feel the chapter's length. Take a household that can commit $350 a month of disposable income — an illustrative figure, stated so you can re-run it with your own. Below the state median, a three-year plan pays $12,600 into the trustee's hands; above the median, the five-year version of the same plan pays $21,000 (350 × 36 and 350 × 60 respectively, before the trustee distributes anything to anyone). Nothing about the debts changed between those two sentences — only the filer's income relative to the median, and with it, two extra years of payments. That is the means test's second job, and it is why "Chapter 13 takes three to five years" is really "Chapter 13 takes three or five years, and your income picks which."

In exchange for those years, Chapter 13 gives back protections Chapter 7 does not have. The one that decides the most cases is the next section's subject. The other is the co-debtor stay: on a consumer debt, a creditor may not go after a co-signer or other person liable alongside you while your plan runs — a protection with no equivalent in Chapter 7, where your discharge leaves a co-signer fully exposed.

Your home: where the chapters split hardest

Filing under either chapter triggers the automatic stay, which stops most collection actions — lawsuits, wage garnishments, even collection calls — the moment the petition is filed. For a foreclosure, the stay buys time in both chapters. What differs is what the time can be used for. In Chapter 13, the past-due mortgage amount can be cured — spread across the plan — while the regular mortgage payments that come due during the plan are made on time. That combination is the mechanism consumer bankruptcy offers a household that is months behind to keep the home and end the case current. The courts' own qualifications matter: the home can still be lost if the foreclosure sale was completed under state law before the petition was filed, or if the payments coming due after filing are missed. In Chapter 7, there is no cure. The discharge removes your personal liability for the mortgage debt, but the lien rides through untouched, so a borrower who is behind has no way to catch up inside the case; once the stay lifts, the lender can proceed against the house. Put plainly: Chapter 7 protects the borrower from the debt; Chapter 13 is the one that can protect the house from the arrears.

Which debts survive bankruptcy

Neither chapter discharges everything, and the surviving list is the part of the comparison with the least daylight between them. In both chapters, you generally still owe: alimony and child support; certain taxes; most government-funded or guaranteed student loans and educational benefit overpayments; debts for death or personal injury caused by driving while intoxicated; and criminal restitution (and, in Chapter 13, criminal fines). Two differences sit at the edges. Chapter 13 keeps you liable for long-term obligations that outlast the plan — pre-eminently the mortgage itself: the plan can cure its arrears, but the loan is not discharged at the end. And Chapter 13's discharge is somewhat broader than Chapter 7's in one specific corner — it can discharge debts for willful and malicious injury to property (as opposed to a person), debts taken on to pay nondischargeable tax obligations, and property settlements arising from a divorce or separation, none of which Chapter 7 discharges. For the debt most readers of this site carry — credit card balances — none of this matters: ordinary unsecured consumer debt is dischargeable in both chapters, subject in Chapter 13 to whatever the plan pays toward it first. How that debt's interest behaves while you are deciding is the subject of how credit card interest is calculated.

The credit record: a 10-year ceiling and a 7-year practice

Here the comparison needs two layers, because the rule and the practice are different numbers. The rule, as the Consumer Financial Protection Bureau states it: bankruptcy information can remain on your credit report for up to 10 years from the date of entry of the order — and the CFPB lists Chapter 7, 11, 12 and 13 under that same ceiling. The practice, as Experian describes its own reporting: a Chapter 7 filing falls off 10 years from the filing date, and a Chapter 13 filing 7 years from the filing date. So the familiar "10 versus 7" is real — but it is the bureaus' convention for Chapter 13, not a separate legal limit, and both clocks start on the day you file, not the day the case ends. The practical consequence is worth doing the arithmetic on: a Chapter 13 filer who spends five years in a plan sees the filing leave their reports about two years after the discharge arrives; a Chapter 7 filer is done with the case in months and carries the report entry for the full decade.

Finishing: the difference nobody puts in the brochure

The last real difference is not in any table of rules. It is in how the two chapters end. Chapter 7's discharge is close to automatic once the case is properly filed — hence the courts' figure of a discharge in more than 99% of cases that are not dismissed or converted. Chapter 13's discharge is earned at the end: it is granted only after all plan payments are completed, and a debtor who stops paying faces dismissal of the case or its conversion to Chapter 7 — leaving the debts, minus whatever the plan already paid, still owed, with the filing on the credit record either way. How often do plans run the full course? The most careful public measurement is dated, and this page labels it as such: Federal Reserve researchers studying Delaware court records from cases filed in 2001–2002 found that about 20% of Chapter 13 filers were dismissed before any plan was even confirmed, and that of the cases that had ended, fewer than half of the plans were carried out to completion ("The Anatomy of U.S. Personal Bankruptcy Under Chapter 13," Federal Reserve Bank of Richmond Working Paper 07-05). One district, one period, a generation ago — not a current national rate. But the structural point it documents is written into the statute itself: a three-to-five-year plan is a three-to-five-year exposure to job losses, illnesses and car repairs, and the law's answer for a plan broken by circumstances beyond the debtor's control is a narrower hardship discharge, available only when creditors have already received at least what a Chapter 7 would have paid them and modifying the plan is not possible. Chapter 7 asks whether you can get in. Chapter 13 asks whether you can stay.

Where does that leave the choice? Inside the rules above, it is usually not a free choice at all. Fail the means test and Chapter 7 is closed. Owe more than the Chapter 13 ceilings and Chapter 13 is closed. Behind on a mortgage you intend to keep, and only one chapter has a cure. The chapters compete in the middle ground — a household that passes the means test, is under the debt limits, and is current on its secured debts — and there the trade is the one this page opened with: months and finality, against years and protection. How the debts that lead here accumulate is the subject of our Credit Card Debt hub, and the payoff routes that come before this one are gathered in Debt Payoff Strategies.