Chapter 7 vs. Chapter 13 Bankruptcy: Which One Fits Your Situation
Figures checked October 27, 2026 against primary sources
Most people who file for bankruptcy on their own behalf choose between two chapters of the federal Bankruptcy Code. Chapter 7 sells whatever you own that the law does not protect and wipes out most of your remaining debts, typically about four months after filing. Chapter 13 lets you keep your property, but you pay part of what you owe through a court-approved plan lasting three to five years. This guide compares the two with the current figures from the U.S. Trustee Program, the federal courts and the Bankruptcy Code itself.
The Short Answer
- Chapter 7 is faster and cheaper, usually ending in a discharge about four months after filing, and it suits people with low income and few assets the law does not protect. Most individual Chapter 7 cases have no assets for the trustee to sell.
- Chapter 13 suits people with steady income who want to keep something: usually a house that is behind on payments, or a car. You pay into a plan for 3 to 5 years.
- Your income decides a lot. If your average income over the six months before filing, times 12, is at or below your state's median for your household size, the means test does not block Chapter 7. For a family of four that median is $139,071 in California and $117,962 in Texas for cases filed now.
- Some debts survive either chapter: child support and alimony, most taxes, most student loans, and criminal fines.
- Court fees are $338 for Chapter 7 and $313 for Chapter 13, plus attorney fees. You must take a credit counseling course before filing and a debtor education course after.
- This is a legal decision. Talk to a bankruptcy attorney or a legal aid office before you file; the details below are general information.
Chapter 7 vs Chapter 13 at a Glance
| Chapter 7 | Chapter 13 | |
|---|---|---|
| What it does | Liquidation: a trustee sells nonexempt property and pays creditors; most remaining debts are discharged | Repayment plan: you keep property and pay creditors from your income |
| How long | Discharge typically about four months after filing | 3 years if income is below the state median, generally 5 if above; never more than 5 |
| Who can file | Individuals who pass the means test (or whose debts are not mainly consumer debts) | Individuals with regular income and unsecured debts under $526,700 and secured debts under $1,580,125 |
| Court fees | $338 ($245 filing + $78 administrative + $15 trustee) | $313 ($235 filing + $78 administrative) |
| Property | Exempt property is kept; nonexempt property can be sold | All property is kept, but unsecured creditors must get at least what Chapter 7 would have paid them |
| Behind on the mortgage | Filing pauses a foreclosure, but there is no tool to catch up over time | Arrears can be caught up through the plan while you make current payments |
| Co-signers | Not protected | Co-debtor stay protects co-signers on consumer debts during the case |
| Federal reporting limit | Up to 10 years | Up to 10 years |
| Next discharge allowed | Chapter 7 again: 8 years after the earlier case was filed | Chapter 13 again: 2 years after a prior Chapter 13, 4 years after a Chapter 7 |
How Chapter 7 Works
The federal courts describe Chapter 7 as "liquidation." When you file, a court-appointed trustee takes charge of your property, sells what is not protected by an exemption, and pays creditors in the order the law sets. The debts that remain unpaid are then discharged, which means you are no longer personally liable for them.
In practice, most people lose little or nothing. Exemptions protect certain property, and the courts note that most Chapter 7 cases filed by individuals are "no asset" cases, where nothing is sold and unsecured creditors receive nothing. Whether your property is protected depends on the exemptions available in your state, so this is the first thing to check with an attorney.
The steps, in order:
- Complete an approved credit counseling briefing within the 180 days before you file.
- File the petition, schedules of what you own and owe, and the means test forms.
- Attend the meeting of creditors, held 21 to 40 days after filing. The trustee asks questions under oath; creditors may attend.
- Complete a debtor education course. Without it, there is no discharge.
- Receive the discharge order.
How Chapter 13 Works
Chapter 13 is often called a wage earner's plan. You propose a plan to pay part or all of your debts over 3 to 5 years, and you start making payments to the trustee within 30 days of filing, even before the court approves the plan. The length depends on income: under the state median, the plan runs three years unless the court allows longer; over the median, it generally runs five years.
How much you pay is set by two rules. You must pay your projected "disposable income" (what is left after allowed living expenses) for the plan's length, and unsecured creditors must receive at least as much as they would have received if your property had been sold in Chapter 7. Priority debts, such as recent taxes and back child support, generally have to be paid in full through the plan.
When you finish the payments and the debtor education course, the court discharges the remaining debts covered by the plan. If you stop paying, the case can be dismissed or converted to Chapter 7, and you lose the protection.
Chapter 13 has two features Chapter 7 lacks. You can catch up on missed mortgage payments over the life of the plan, and a creditor generally cannot go after someone who co-signed a consumer debt with you while the case is open.
The Means Test and 2026 State Median Incomes
The means test decides whether a Chapter 7 filing is presumed to be an abuse because you could afford to repay some of your debts. It applies to individuals whose debts are mainly consumer debts. It has two stages.
Stage 1: compare your income to the state median. Add up your income from all sources (wages, business income, rent, regular help from others toward household bills) for the six full calendar months before you file, and divide by six. This is your "current monthly income." Social Security benefits are excluded. Multiply it by 12 and compare the result to the median family income for your state and household size. If yours is equal to or lower, no one can ask to dismiss your case under the means-test formula.
The U.S. Trustee Program publishes the table. The current version applies to cases filed on or after July 15, 2026, and its median income figures are the same ones in force since April 1, 2026 (Census data published in September 2025, adjusted for inflation). Some examples:
| State | 1 earner | 4 people |
|---|---|---|
| California | $79,253 | $139,071 |
| Texas | $66,837 | $117,962 |
| Florida | $69,876 | $114,761 |
| New York | $73,272 | $139,040 |
For households above four people, add $11,100 for each extra person. Every state, plus DC and the territories, is on the U.S. Trustee Program's means testing page; pick the period that matches your filing date, because the table is updated during the year.
Stage 2: the full calculation, if you are above the median. You subtract expenses allowed by IRS collection standards and the law, plus secured debt payments, and look at what is left over five years. Abuse is presumed if that amount is at least the greater of $10,275 or 25% of your nonpriority unsecured debt, or if it is $17,150 or more in any case. A presumption can be rebutted only by special circumstances. Being above the median does not by itself rule out Chapter 7, but this calculation is complicated enough that an attorney should do it.
Hypothetical example: a single filer in Texas whose income over the last six months averaged $5,000 a month has an annualized figure of $60,000. That is below the $66,837 median for one earner, so the means test does not block Chapter 7, and if that filer chose Chapter 13 instead, the plan could be three years.
Chapter 13 Debt Limits
Chapter 13 is open only to individuals with regular income whose debts fall under two caps in 11 U.S.C. 109(e). Since April 1, 2025, they are:
- Unsecured debts: less than $526,700.
- Secured debts: less than $1,580,125.
Only debts that are fixed in amount and not dependent on a future event count. The limits apply to a married couple filing together as well. A temporary single limit of $2,750,000, added in 2022, expired on June 21, 2024, so the two separate caps are back. The amounts are adjusted for inflation every three years by a Judicial Conference notice in the Federal Register; the next adjustment is due April 1, 2028.
Filing Fees, Counseling and the Automatic Stay
Court fees. The federal fee schedule in effect since December 1, 2023 adds up to:
- Chapter 7: $338, made up of a $245 filing fee, a $78 administrative fee and a $15 trustee fee.
- Chapter 13: $313, made up of a $235 filing fee and a $78 administrative fee.
With the court's permission you can pay in up to four installments, the last one due within 120 days of filing. In Chapter 7, the court may waive the fees if your income is below 150% of the poverty level and you cannot pay even in installments. Attorney fees are separate.
Credit counseling before filing. You must complete a briefing from an approved nonprofit credit counseling agency in the 180 days before you file. If you skip it, the case can be dismissed.
Debtor education after filing. A separate personal financial management course, taken after filing, is required for a discharge in both chapters. Both courses must come from providers approved by the U.S. Trustee Program, which publishes lists of approved credit counseling agencies and approved debtor education providers. In Alabama and North Carolina, the courts' bankruptcy administrators approve providers instead.
The automatic stay. Filing either chapter immediately stops most collection: lawsuits, wage garnishments, foreclosures, repossessions and collection calls. The stay has exceptions (for example, collecting domestic support from property that is not part of the bankruptcy estate) and is limited if you had another case dismissed within the past year, so ask your attorney how it applies to you.
Debts Bankruptcy Usually Does Not Erase
Section 523 of the Bankruptcy Code lists debts that a Chapter 7 discharge does not cover. The main ones for individuals:
- Most taxes: recent income taxes and other priority taxes, taxes for years you never filed a return or filed late within two years of the bankruptcy, and taxes involving a fraudulent return. Some older income taxes can be discharged; this is a detailed rule an attorney should check.
- Domestic support obligations: child support and alimony.
- Student loans: federal and most private education loans, unless you prove that repaying them would impose an "undue hardship," which takes a separate court proceeding.
- Fines and penalties owed to a government, including criminal fines, and criminal restitution orders.
- Debts from fraud, embezzlement, or willful and malicious injury, and debts for death or injury caused by driving while intoxicated.
- Last-minute charges: luxury purchases of more than $900 from one creditor within 90 days before filing, and cash advances totaling more than $1,250 within 70 days, are presumed to be fraud.
- Debts you leave off your schedules, in some cases.
A completed Chapter 13 plan discharges a somewhat wider set of debts. For example, debts to a former spouse from a divorce property settlement (not support) can be discharged in Chapter 13 but not Chapter 7. Support, most taxes, student loans and criminal fines still survive.
Bankruptcy also does not remove a lien. If a loan is secured by your house or car, the lender can still take the property if you stop paying, even after your personal liability is discharged.
Keeping Your House and Car
Exemptions decide what you keep in Chapter 7. Each state either sets its own list of exempt property or lets filers choose between the state list and a federal list. Homestead (home equity) protection varies widely from state to state, so the same house can be safe in one state and at risk in another. A bankruptcy attorney in your state can tell you how much equity is protected.
If you are current on a car or house loan and your equity is exempt, you can usually keep the property in Chapter 7 by continuing to pay. For a car loan, lenders often ask you to sign a reaffirmation agreement, which keeps you personally liable for that loan after the bankruptcy. It must be signed before the discharge and filed with the court; read it carefully, because it brings back the debt you were trying to escape.
If you are behind on the mortgage, Chapter 13 is the chapter built for it. Filing stops the foreclosure, and the plan lets you pay the missed payments over time as long as you also keep up with the regular payments. Timing matters: if the foreclosure sale is completed under state law before you file, Chapter 13 cannot undo it.
Nonexempt property you want to keep is another reason people choose Chapter 13. You keep it, but your plan must pay unsecured creditors at least what they would have gotten from its sale.
Credit Reports and Waiting Periods
How long it shows. The Fair Credit Reporting Act (15 U.S.C. 1681c) allows a credit bureau to report a bankruptcy case for up to 10 years from the date of the order for relief, which is normally the filing date. The 10-year limit does not apply to reports used for credit or life insurance of $150,000 or more, or a job paying $75,000 a year or more. Equifax says bankruptcy records stay on its reports for seven to 10 years depending on the type of bankruptcy; ask the bureaus directly how they treat your case. The courts do not send anything to the bureaus, but filings are public records.
Waiting periods for a new discharge. You can file again at any time, but you will not get a discharge until enough time has passed since the earlier case:
| Earlier discharge | New case | Time between filing dates |
|---|---|---|
| Chapter 7 | Chapter 7 | 8 years |
| Chapter 7 | Chapter 13 | 4 years |
| Chapter 13 | Chapter 13 | 2 years |
| Chapter 13 | Chapter 7 | 6 years, unless the Chapter 13 plan paid 100% of unsecured claims, or at least 70% and was your good-faith best effort |
Alternatives to Try First
- Call your creditors. The FTC notes that creditors may agree to lower payments and sometimes accept less than the full balance. You can do this yourself at no cost.
- A debt management plan through a nonprofit credit counselor. The counselor arranges a payment schedule, and creditors may lower interest rates or waive fees. The FTC says these plans can take 48 months or more and do not cover secured debts like a mortgage or car loan.
- Debt settlement, paying a lump sum that is less than you owe. It damages your credit, creditors do not have to agree, and forgiven debt may be taxable. Our debt settlement guide works through the real cost.
- A consolidation loan, if your credit is still good enough for a lower rate. See debt consolidation.
- A structured payoff using the avalanche or snowball method, if your income can cover more than the minimums.
One common mistake is draining a retirement account to pay unsecured debts before talking to an attorney. Retirement savings in qualified plans are generally protected in bankruptcy, so cashing them out can give up an asset you could have kept. See 401(k) loan vs withdrawal for the tax cost. If collectors are calling, know what they can and cannot do.
Should You Declare Bankruptcy? A Decision Guide
These questions do not replace legal advice, but they cover the points an attorney will ask about first.
- Could you repay your unsecured debts within about five years with a realistic budget? If yes, a debt management plan or negotiation may solve the problem without bankruptcy. If not, bankruptcy is worth a consultation. Your debt-to-income ratio is a quick first check.
- Are most of your debts the kind bankruptcy does not erase, such as student loans, recent taxes or child support? Then bankruptcy may help less than you expect.
- Is your income at or below your state's median? Chapter 7 is usually available. Above it, the full means test decides.
- Do you own property your state's exemptions would not protect, or are you behind on a mortgage you want to keep? Chapter 13 is usually the better fit.
- Do you have steady income for the next 3 to 5 years? Chapter 13 depends on it. Plans fail when income drops.
- Is a lawsuit, garnishment or foreclosure sale coming up? The automatic stay can stop it, so talk to an attorney promptly.
- Did you get a bankruptcy discharge in the last 8 years? Check the waiting periods above.
If you cannot afford an attorney, the U.S. Trustee Program points to the clerk of your local bankruptcy court or your state bar association for reduced-fee or free help, and local legal aid offices also handle bankruptcy cases. You can legally file without a lawyer, but the federal courts strongly recommend getting one and warn that mistakes can affect your rights. Their Bankruptcy Basics guide is a good place to read more before a consultation.
FAQ
What is the main difference between Chapter 7 and Chapter 13?
Chapter 7 sells your nonexempt property and discharges most remaining debts in a few months. Chapter 13 lets you keep your property while you pay creditors through a 3 to 5 year plan, then discharges what is left.
How do I calculate the means test?
Add your gross income from all sources for the six full months before you file (excluding Social Security benefits), divide by six, and multiply by 12. If the result is at or below the median for your state and household size on the U.S. Trustee Program's table, you pass. If it is above, you complete the full expense calculation on Official Form 122A-2.
Is there a means test for Chapter 13?
Not to qualify, but the same income comparison decides whether your plan lasts three or five years, and for above-median filers, the expense calculation helps set the monthly payment.
How much does it cost to file?
Court fees are $338 for Chapter 7 and $313 for Chapter 13, plus the cost of the two required courses and attorney fees. Fees can be paid in installments, and Chapter 7 fees can be waived for low-income filers.
Can I keep my car in Chapter 7?
Often yes, if your equity in it is covered by an exemption and you keep paying the loan. The lender may require a reaffirmation agreement. If you are behind on the car loan, Chapter 13 gives more room to catch up.
Does bankruptcy get rid of student loans?
Usually not. You have to show that repaying them would cause undue hardship, through a separate proceeding in the bankruptcy court.
How long does bankruptcy stay on a credit report?
Federal law lets bureaus report it for up to 10 years from filing. Equifax says it keeps bankruptcy records seven to 10 years depending on the type.
Can I switch from Chapter 13 to Chapter 7?
Generally yes, you can convert a Chapter 13 case to Chapter 7, as long as you qualify for Chapter 7 at that point. An attorney can explain what happens to property and payments when you convert.
This article is for general information and is not legal or financial advice. Bankruptcy outcomes depend on your state's exemptions and your specific facts; consult a bankruptcy attorney or legal aid office before filing. Statutes are from the U.S. Code (uscode.house.gov), median incomes from the U.S. Trustee Program table for cases filed on or after July 15, 2026, and fees from the U.S. Courts fee schedule, all read on 2026-10-27. The means-test example is hypothetical.