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Chapter 7 vs Chapter 13 Bankruptcy: What Is the Difference?
Moneymagpie Team
16th Jun 2026
One of the most common questions people ask when they are thinking about bankruptcy is: “What is the difference between Chapter 7 and Chapter 13 bankruptcy?”
It is a fair question because the two options can feel confusing at first. Both are forms of bankruptcy. Both may help you deal with overwhelming debt. But they work very differently.
A simple way to remember the difference is this: Chapter 7 is usually faster. Chapter 13 usually takes longer.
Chapter 7 bankruptcy is often completed in a few months. Chapter 13 bankruptcy usually involves a repayment plan that lasts 3 to 5 years.
Another simple difference is cost. Chapter 7 is often less expensive overall. Chapter 13 can be more expensive because it usually involves attorney fees, trustee fees, and monthly plan payments over several years.
That said, Chapter 7 may not not always the best option. Chapter 13 can be the right option if you are behind on your house, behind on your car, have assets you want to protect, or do not qualify for Chapter 7.
This article explains Chapter 7 vs Chapter 13 bankruptcy in simple terms so you can better understand which option may fit your situation.
- What Is Chapter 7 Bankruptcy?
- What Is Chapter 13 Bankruptcy?
- Chapter 7 vs Chapter 13: Main Differences
- Pros and Cons of Chapter 7 Bankruptcy
- Pros and Cons of Chapter 13 Bankruptcy
- How to Decide Between Chapter 7 and Chapter 13
- Speak With a Bankruptcy Attorney
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is often called a liquidation bankruptcy. That sounds scary, but many people who file Chapter 7 do not lose any property.
The goal of Chapter 7 is usually to wipe out eligible unsecured debts, such as credit cards, medical bills, personal loans, old utility bills, and certain collection accounts.
In a Chapter 7 case, a bankruptcy trustee reviews your property. If you own property that is not protected by bankruptcy exemptions, the trustee may be able to sell that property and use the money to pay creditors.
However, many Chapter 7 cases are “no-asset” cases. That means there is no property available for the trustee to sell because the filer’s assets are protected by exemptions.
How Does Means Test Work For Chapter 7 Qualification?
Not everyone qualifies for Chapter 7. Many people must pass the bankruptcy means test, which looks at income, household size, expenses, and state-specific median income numbers.
You can use an online Chapter 7 means test calculator that can help you estimate whether you qualify below or even above the median.
If your income is below the median income for your household size in your state, you may qualify more easily. If your income is above the median, you may still qualify, but the calculation becomes more detailed.
Chapter 7 can be a good fit for someone who has mostly unsecured debt, limited disposable income, and property that is protected by exemptions.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is often called a repayment plan bankruptcy or a wage earner’s plan.
Instead of wiping out eligible debts quickly, Chapter 13 creates a monthly repayment plan. The plan usually lasts 3 to 5 years.
Your Chapter 13 payment may depend on several factors, including your income, expenses, debts, assets, mortgage arrears, car loans, taxes, attorney fees, trustee fees, and nonexempt equity.
Chapter 13 is generally for individuals with regular income. This can include wages, self-employment income, retirement income, or other consistent income.
Why Someone May File Chapter 13
People often file Chapter 13 when they need more than a simple discharge of unsecured debt.
For example, Chapter 13 may help if you are behind on your mortgage and want to stop foreclosure. It may also help if you are behind on your car and want to stop repossession.
Chapter 13 can also help protect property that may be at risk in Chapter 7. Instead of the trustee selling the property, you may be able to keep it and pay creditors through your repayment plan.
Chapter 7 vs Chapter 13: Main Differences
The biggest difference between Chapter 7 and Chapter 13 is how debts are handled. The bankruptcy filing process is actually similar, but let’s talk about the differences.
In Chapter 7, eligible debts may be discharged without a long repayment plan. In Chapter 13, you make monthly payments through a court-approved plan.
Time
Chapter 7 is usually much faster. Many simple Chapter 7 cases are completed in about 4 to 6 months.
Chapter 13 usually lasts 3 to 5 years. That is a much longer commitment, and it requires steady monthly payments.
Cost
Chapter 7 is often less expensive overall. Attorney fees are usually lower because the case is shorter and less complex.
Chapter 13 attorney fees are often higher, but some attorneys allow part of the fee to be paid through the repayment plan. This can make Chapter 13 easier to file upfront, but it may cost more over time.
Property
In Chapter 7, property that is not protected by exemptions may be at risk.
In Chapter 13, you generally keep your property, but your plan payment may need to account for the value of nonexempt assets.
House and Car Payments
Chapter 7 may help remove unsecured debts, but it usually does not give you years to catch up on missed mortgage or car payments.
Chapter 13 may allow you to catch up on past-due mortgage or car payments over time, which can make it useful for stopping foreclosure or repossession.
Pros and Cons of Chapter 7 Bankruptcy
Pros of Chapter 7
Chapter 7 can be a faster path to debt relief. It may eliminate many unsecured debts without requiring years of payments. In addition, there are many cheap ways to file Chapter 7 bankruptcy.
It is often less expensive than Chapter 13. It can also be helpful if you have little disposable income and cannot realistically afford a repayment plan.
Chapter 7 may also allow you to surrender property you can no longer afford, such as a car with a high payment, and discharge the remaining eligible balance.
Cons of Chapter 7
The biggest risk in Chapter 7 is property loss. If you have assets that are not protected by exemptions, the trustee may be able to sell them.
Chapter 7 may also not be ideal if you are behind on a mortgage or car loan and want to keep the property. It can temporarily stop collection, but it usually does not create a long-term catch-up plan.
Also, some debts do not go away in Chapter 7, such as child support, alimony, many tax debts, and most student loans.
Pros and Cons of Chapter 13 Bankruptcy
Pros of Chapter 13
Chapter 13 can help stop foreclosure and give you time to catch up on missed mortgage payments. It may also help stop repossession and allow you to keep a vehicle.
Chapter 13 can be useful if you have property that would be at risk in Chapter 7. It may also help you manage certain debts that are not easily discharged, such as recent taxes or support arrears.
Another benefit is that some attorney fees may be paid through the Chapter 13 plan instead of all upfront.
Cons of Chapter 13
Chapter 13 takes much longer than Chapter 7. A 3-to-5-year payment plan is a serious commitment.
The monthly payment can also be difficult to maintain. If your income drops or expenses increase, the plan may become unaffordable.
Chapter 13 is often more expensive overall, and if the case is dismissed before completion, you may not receive the discharge you expected.
How to Decide Between Chapter 7 and Chapter 13
The right option depends on your specific situation.
Chapter 7 may make sense if you qualify, your property is protected, and most of your debt is unsecured and dischargeable.
Chapter 13 may make sense if you are behind on your house or car, have assets you need to protect, do not qualify for Chapter 7, or need time to repay certain debts.
Before deciding, it can be helpful to estimate both options. A Chapter 7 vs Chapter 13 calculator can help you compare qualification, cost, estimated Chapter 13 payment, timeline, and possible alternatives.
Speak With a Bankruptcy Attorney
Bankruptcy can be helpful, but it is also a legal process with long-term consequences.
A bankruptcy attorney can help you understand whether you qualify for Chapter 7, whether Chapter 13 is affordable, whether your property is protected, and which debts may or may not be discharged.
Chapter 7 and Chapter 13 can both provide relief, but they solve different problems. The most important step is understanding your options before you file.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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