Chapter 7 vs Chapter 13

Two Different Tools for Two Different Problems

Chapter 7 and Chapter 13 solve different problems. Chapter 7 is a liquidation: a trustee can sell non-exempt property to pay creditors, and in exchange most qualifying unsecured debts are discharged, typically within about 90 to 100 days in a no-asset case (uscourts.gov). Chapter 13 is a reorganization: you keep your property and repay creditors through a three-to-five-year plan. The right choice turns on your income, the assets you want to protect, and whether you are behind on secured debt you want to keep.

Side-by-Side Comparison

Timeline: Chapter 7 discharge typically arrives in about 90–100 days; Chapter 13 requires a 3-year (below-median) or 5-year (above-median) plan before discharge (uscourts.gov).

Your assets: Chapter 7 may liquidate non-exempt property; Chapter 13 lets you keep non-exempt assets if your plan pays unsecured creditors at least their Chapter 7 liquidation value (uscourts.gov).

Mortgage/car arrears: Chapter 7 cannot cure missed payments to keep the collateral; Chapter 13 can cure arrears over the plan term while you resume regular payments (uscourts.gov).

Income eligibility: Chapter 7 generally requires income below the state median, or passing the Form 122A-2 calculation if above; Chapter 13 requires regular income to fund the plan and debts within the §109(e) limits (justice.gov/ust/means-testing; uscourts.gov).

Repeat use: a Chapter 7 discharge is available once every 8 years; Chapter 13's discharge timing follows different rules but its multi-year plan structure governs each case (uscourts.gov).

When the Means Test Decides for You

The means test compares your six-month average gross income against your state's median family income for your household size, using Form 122A-1 (justice.gov/ust/means-testing). Below the median, Chapter 7 is generally available. Above the median, you complete the Form 122A-2 calculation, and if it shows you can repay a meaningful share of your debts, the court may presume that a Chapter 7 filing is an abuse — effectively steering you into Chapter 13 (justice.gov). The U.S. Trustee's median tables effective April 1, 2026 set the current thresholds.

What Neither Chapter Erases Automatically

Some debts survive a discharge in both chapters: most taxes, domestic-support obligations, debts arising from fraud, and most student loans. Student loans are the notable overlay — neither chapter discharges federal student loans automatically, but in either chapter you can pursue an adversary proceeding under §523(a)(8) to seek an undue-hardship discharge (justice.gov; studentaid.gov). Choosing Chapter 13 over Chapter 7 does not forfeit that option. Which chapter fits your circumstances is a decision to make with a licensed attorney. People's Justice is not a law firm and does not provide legal advice; we connect you with licensed attorneys, and we are not a government agency.

Choosing Chapter 13 When You Could Qualify for Chapter 7

Passing the means test does not mean Chapter 7 is automatically the better choice. Some people who qualify for Chapter 7 deliberately file Chapter 13 instead. The most common reason is to save collateral: a homeowner behind on a mortgage, or a borrower behind on a car they need, cannot cure those arrears in Chapter 7 but can in Chapter 13 (uscourts.gov). Others choose Chapter 13 to protect non-exempt property that a Chapter 7 trustee could otherwise sell, or to manage priority debts like recent taxes over time. The reorganization chapter trades speed for the ability to keep what matters.

Shared Procedural Requirements

Both chapters share several requirements. You must complete approved credit counseling within the 180 days before filing and a debtor-education course (Form 423) before discharge. Both impose the automatic stay under §362 at filing, halting collection. And both involve a 341 meeting of creditors run by a trustee — not a judge — typically 20 to 40 days after filing (uscourts.gov). The mechanics diverge after that: Chapter 7 moves toward a quick discharge in a no-asset case, while Chapter 13 moves toward plan confirmation and years of payments.

Costs and Trade-Offs to Weigh

Neither chapter is consequence-free. A bankruptcy appears on your credit report and can affect access to new credit. Chapter 7's main cost is its limits — it cannot cure arrears or shield non-exempt assets. Chapter 13's main cost is duration and risk — committing to three to five years of payments is demanding, and a meaningful share of plans are not completed. Weighing these trade-offs against your income, assets, and goals is exactly the kind of analysis to do with a licensed attorney. People's Justice is not a law firm and does not provide legal advice; we connect you with licensed attorneys, and we are not a government agency.