Chapter 13 vs. Chapter 7 Bankruptcy, How to Decide Which One Is Right for Your Situation
The biggest difference between Chapter 7 and Chapter 13 is that with Chapter 7, things you own may be liquidated to repay creditors and you do not make a repayment plan. With Chapter 13, you keep your belongings and make a plan to repay debt over time. For most people, the decision comes down to three things: how much you earn, what property you own, and what you are trying to accomplish. This guide walks through every factor so you can figure out which chapter fits your situation.
Before reading, make sure you understand the basics of both options. Start with What Does Chapter 13 Bankruptcy Mean and our breakdown of How Chapter 13 Bankruptcy Works.
Side-by-Side Comparison
| Factor | Chapter 7 | Chapter 13 |
| Also Called | Liquidation bankruptcy | Wage earner’s plan |
| Time to Complete | 3–6 months | 3–5 years |
| Income Requirement | Must pass means test | Must have regular income |
| Repayment Plan | None | 3–5 year court-approved plan |
| Property Risk | Non-exempt assets may be sold | No assets sold |
| Stops Foreclosure? | Temporarily — does not cure arrears | Yes — can cure missed payments over time |
| Credit Report Impact | 10 years | 7 years |
| Filing Fee | $338 | $313 |
| Governing Law | 11 U.S.C. §§ 701–784 | 11 U.S.C. §§ 1301–1330 |
| Last Updated | May 12, 2026 | May 12, 2026 |
The First Question: Can You Even Choose?
Many people assume they get to pick freely between Chapter 7 and Chapter 13. In reality, your income may make that decision for you.
Before filing for bankruptcy, you must take the Means Test. It measures your household income against state averages. If your income falls below a certain threshold, you are eligible for Chapter 7. If your income is above the threshold, you will need to file under Chapter 13.
The Means Test looks at your average monthly income over the past six months and compares it to your state’s median income for households your size. Pass the test and you can proceed with Chapter 7, which wipes out most unsecured debts in 3–4 months. Fail it and you will likely need Chapter 13 instead.
Passing the first part of the Means Test is not the end of it. If you are above your state’s median, you are not automatically disqualified. You move to the second part of the test, which subtracts allowed expenses from your income — things like mortgage or rent payments, vehicle payments, taxes, health insurance, and certain living expenses based on IRS standards. If you have limited disposable income left after those deductions, you can still qualify for Chapter 7.
Choose Chapter 7 When These Apply to You
Choose Chapter 7 if you pass the income requirements or the means test, have mainly credit card or medical debt, can protect your property with bankruptcy exemptions, and want quick debt relief.
Chapter 7 makes the most sense when:
- You have little to no significant assets — no home equity worth protecting, modest car, standard household belongings
- Most of your debt is unsecured — credit cards, medical bills, personal loans
- You need relief fast — Chapter 7 takes three to six months from filing to discharge
- You do not have missed mortgage or car payments you need to catch up on
- Your income falls below your state’s median or your disposable income is low after expenses
Chapter 7 is the most common form of bankruptcy — over 70% of all bankruptcies filed are Chapter 7. Most filers get a discharge within 3–4 months of filing. It is faster, simpler, and requires no ongoing payments.
Related article: Surrendering Property in Chapter 13 Bankruptcy, When It Happens, What It Means, and What Happens to Your Debt
Choose Chapter 13 When These Apply to You
Choose Chapter 13 if you earn too much for Chapter 7, are behind on mortgage or car payments, or have non-exempt property you want to protect.
Chapter 13 makes the most sense when:
- You own a home and are behind on your mortgage — Chapter 13 can cure arrears over time and stop foreclosure permanently, not just temporarily
- You own property that would be sold in Chapter 7 — Chapter 13 lets you keep it by paying its value through the plan
- Your income is above the state median and you do not pass the Chapter 7 means test
- You have non-dischargeable debts like back taxes or domestic support obligations you need to repay in a structured way
- You want the shorter 7-year credit report window instead of Chapter 7’s 10-year mark
Chapter 13 offers asset protection and time to address secured debt arrearages. Chapter 7 cannot help homeowners make up missed mortgage payments — Chapter 13 was specifically designed for that situation.
The Home Ownership Factor: The Clearest Deciding Factor
This is where the decision becomes most clear-cut for many people. If you own a home and are behind on your mortgage, Chapter 7 will not save it.
Chapter 7 can temporarily stop foreclosure, but the foreclosure will eventually proceed. Chapter 13 allows homeowners who have fallen behind on mortgage payments to catch up on overdue amounts over time through the repayment plan.
Chapter 13 allows you to catch up on secured debts like your home or car while also discharging unsecured debts. Chapter 7 focuses on discharging unsecured debts but does not give you a structured way to deal with mortgage arrears.
If keeping your home is your primary goal, Chapter 13 is almost always the right answer. If you are renting and mostly dealing with credit card debt, Chapter 7 is almost always the faster, cleaner option.
What About Your Car?
Under federal exemptions, you can protect up to $5,025 in vehicle equity for filings between April 1, 2025, and March 31, 2028 — though many states have more generous vehicle exemptions. If your car equity falls within your state’s exemption limit, you can keep it in Chapter 7. If it exceeds the exemption, the trustee could sell it.
In Chapter 13, you keep your car and can even use the plan to catch up on missed payments. For people behind on car loans, Chapter 13 gives you time to cure the arrearage without losing the vehicle.
The Credit Report Difference: 7 Years vs. 10 Years
This is a factor many people overlook when choosing between chapters. Chapter 13 stays on your credit report for 7 years. Chapter 7 stays for 10 years. If rebuilding your credit quickly matters to you — for a future mortgage, car loan, or job application — Chapter 13 disappears from your record three years sooner.
If you need fast debt relief right now and are willing to accept a longer credit recovery window, Chapter 7 still makes sense for many people. But if you are thinking five to ten years ahead, the shorter reporting period in Chapter 13 is a real advantage.
The “Chapter 20” Strategy: When You File Both
Some attorneys recommend a strategy called “Chapter 20” — not an actual chapter of the Bankruptcy Code, but a two-step approach. It starts with a Chapter 7 filing that discharges all qualifying debts, followed later by a Chapter 13 filing to handle debts that could not be discharged in Chapter 7. This is used in specific situations where someone needs to wipe out credit card debt first and then use a Chapter 13 plan to deal with remaining secured or priority debts.
This strategy is complex and involves the waiting periods covered in our How Often Can You File Chapter 13 guide. It requires an attorney to execute correctly.
A Simple Decision Framework
Work through these questions in order:
1. Do you pass the Chapter 7 means test? If no → Chapter 13 is your only option for a discharge.
2. Are you behind on your mortgage and want to keep your home? If yes → Chapter 13, regardless of whether you qualify for Chapter 7.
3. Do you own property worth more than your state’s exemption limits? If yes → Chapter 13 lets you keep it through the repayment plan.
4. Is most of your debt credit cards, medical bills, or personal loans? If yes and you pass the means test → Chapter 7 is faster and simpler.
5. Do you need debt relief in months rather than years? If yes → Chapter 7, as long as you meet the income test.
Frequently Asked Questions
Can I choose Chapter 13 even if I qualify for Chapter 7?
Yes. Qualifying for Chapter 7 does not force you to file Chapter 7. Many people who qualify for Chapter 7 choose Chapter 13 because they want to protect home equity, keep a car worth more than the exemption, or catch up on missed mortgage payments.
What is the means test and how does it affect my choice?
The means test is a screening process used by the bankruptcy court to determine if an individual with mostly consumer debt is eligible to file Chapter 7. If your disposable income exceeds certain thresholds, the court may require you to file Chapter 13 instead.
Does Chapter 13 or Chapter 7 hurt your credit more?
Both damage credit significantly in the short term. Chapter 7 stays on your credit report for 10 years; Chapter 13 stays for 7 years. Chapter 13 can appear more favorably to some future lenders because it shows an effort to repay debts.
What law governs the means test for Chapter 7?
The means test is codified at 11 U.S.C. § 707(b)(2). The U.S. Trustee Program publishes updated median income figures at justice.gov/ust/means-testing, updated twice per year.
What if I am not sure which chapter applies to me?
Most bankruptcy attorneys offer free consultations. Given the complexity of exemptions, income calculations, and property rules, a 30-minute consultation with a licensed bankruptcy attorney before filing is the most reliable way to get the right answer for your situation.
Sources & References
- U.S. DOJ — Means Testing (Official Median Income Data)
- Cornell Law LII — 11 U.S.C. § 707(b) Means Test
- U.S. Courts — Chapter 7 Bankruptcy Basics
- U.S. Courts — Chapter 13 Bankruptcy Basics
Prepared by the AllAboutLawyer.com Editorial Team and reviewed for factual accuracy against official legal sources. Last Updated: May 12, 2026
Disclaimer: This article is for general informational and educational purposes only and does not constitute legal advice. Laws vary by state and jurisdiction. For advice about your specific situation, consult a qualified attorney.