One wipes out qualifying debt in months. The other restructures it over years but can save your house. The right choice depends on math most people haven't actually run.
Chapter 7 and Chapter 13 solve different problems, and confusing them is one of the most common reasons people delay filing far longer than they need to. Here's the practical distinction, past the textbook definitions.
Chapter 7 — sometimes called "liquidation" bankruptcy — discharges most unsecured debt (credit cards, medical bills, personal loans) in a matter of months, typically without a repayment plan. In exchange, a trustee has the authority to sell non-exempt assets to pay creditors, though in the large majority of consumer cases, exemption laws protect enough property that little or nothing is actually liquidated.
The catch is the means test: your income has to fall below your state's median household income for your family size, or pass a more detailed calculation involving allowed expenses, to qualify. Above that threshold, Chapter 7 generally isn't available and Chapter 13 becomes the path forward instead.
Chapter 13 restructures debt into a court-approved repayment plan lasting three to five years, based on your income. It doesn't require passing the means test in the same way, and critically, it allows you to catch up on mortgage or car loan arrears over the life of the plan while keeping the property — something Chapter 7 generally can't offer if you're behind on secured debt and want to keep the asset.
At the end of a successful Chapter 13 plan, remaining qualifying unsecured debt is typically discharged, similar to Chapter 7, but you've spent years inside a structured, court-supervised budget to get there.
Are you behind on your mortgage but want to keep the house? Chapter 13 is generally built for exactly this situation. Chapter 7 doesn't offer a mechanism to cure the arrears over time.
Do you have significant non-exempt assets? If your state's exemptions wouldn't fully protect valuable property, Chapter 13 lets you keep it while paying creditors a negotiated amount instead of risking liquidation under Chapter 7.
Do you make too much for Chapter 7? The means test isn't optional. If your income is above your state's threshold, Chapter 13 may be the only chapter available, income permitting.
Do you need the fastest possible discharge? Chapter 7 typically resolves in three to six months. Chapter 13 is a multi-year commitment by design.
Most student loans, recent tax debt, domestic support obligations, and certain other categories generally survive both chapters. Anyone filing primarily because of student loan debt should have a direct conversation with an attorney about whether bankruptcy actually solves the underlying problem before filing.
Federal bankruptcy law is identical nationwide, but which of your assets are protected — your home equity, your vehicle, your personal property — depends on your state's exemption rules, and about a third of states require using the state's list exclusively rather than the federal alternative. This single detail is often the deciding factor in which chapter makes sense and how a case should be structured. Our state-by-state bankruptcy guides cover which exemption system applies where you live.
This article covers general principles. For deadlines and rules specific to your state, start with our bankruptcy guide.
Browse Bankruptcy Guides by State →