Bankruptcy Chapter 7 vs 13: Complete Comparison Guide

Income Requirements: Who Qualifies for Each Chapter

Chapter 7 requires passing the means test or earning below your state's median income. A California household of four must earn under $117,715 annually to skip the full means test calculation. Earn more and you need enough deductible expenses to bring your disposable income below the threshold.

Chapter 13 flips the income requirement. You need regular income to fund a repayment plan. Social Security counts. Pension income counts. Even unemployment benefits can work if they are consistent. The key is predictability over the 3 to 5 year plan period.

The Six-Month Lookback Rule

Both chapters use six months of income data for different purposes. Chapter 7 means test averages your gross income from the previous six calendar months. Got a bonus in month three? That bumps your average even if you make less now.

Timeline Differences: Speed vs Control

Chapter 7 moves fast. File today, attend your 341 meeting in 30 to 45 days, receive discharge roughly 60 days after that. Total time from filing to debt elimination runs 90 to 120 days in straightforward cases. No ongoing payments, no monthly budgets, just done.

Chapter 13 is a marathon. Your plan lasts 36 months if income falls below median, 60 months if above. You make monthly payments to a trustee who distributes funds to creditors. Miss payments and your case gets dismissed.

How Each Chapter Treats Your Property

Chapter 7 is called liquidation bankruptcy for a reason. The trustee can sell nonexempt assets to pay creditors. Exemptions protect most property in practice. Your state determines exemption amounts. California homestead exemption reaches $300,000. Texas has no dollar limit on home equity.

Real talk: most Chapter 7 cases are "no asset" cases. The trustee finds nothing worth selling after exemptions apply. You keep everything. But if you own a vacation home, significant investment accounts, or valuable collectibles, Chapter 7 puts them at risk.

Vehicle Treatment Comparison

Car loans create interesting differences. In Chapter 7 you have three options: reaffirm the debt and keep paying, surrender the vehicle and discharge the loan, or redeem by paying current market value in a lump sum.

Chapter 13 offers cramdown on vehicles purchased more than 910 days before filing. Owe $25,000 on a car worth $15,000? Your plan pays only $15,000 plus interest. The remaining $10,000 becomes unsecured debt.

Total Cost Breakdown for Each Chapter

Chapter 7 costs less upfront but requires full payment before filing. Court filing fee runs $338. Attorney fees range from $1,500 in straightforward cases to $2,500 or more with complications. Credit counseling courses add another $50 to $100. Total out-of-pocket typically falls between $1,900 and $2,900.

Chapter 13 filing fee is actually lower at $313. But attorney fees run $3,000 to $6,000 because the case requires ongoing work over 3 to 5 years. The advantage? You can roll attorney fees into your plan payment. No large upfront cost required.

Credit Score Impact and Recovery Timeline

Both chapters hammer your credit score immediately. Expect a 150 to 200 point drop regardless of which you file. Someone with a 720 score might land around 550. Someone already at 580 might drop to 450 or lower.

Chapter 7 stays on your credit report for 10 years from filing. Chapter 13 drops off after 7 years. Sounds like Chapter 13 wins, right? Not so fast. Chapter 7 filers can start rebuilding immediately. Chapter 13 filers make plan payments for years before meaningful rebuilding begins.

Federal Reserve data shows most Chapter 7 filers reach 680 credit scores within 3 years of discharge. They qualify for car loans within months, mortgages within 2 years (FHA) or 4 years (conventional).

"The right chapter choice can mean keeping your home or losing it. Your bankruptcy attorney can run both scenarios and show you which produces better outcomes." — Jeffy Goetz, Bankruptcy Attorney

FAQ

Can I switch from Chapter 13 to Chapter 7 after filing?
Yes, conversion is allowed if you qualify for Chapter 7 under the means test. Many people convert when income drops during their Chapter 13 plan. You file a motion, the court reviews eligibility, and the case proceeds under Chapter 7 rules.

Which chapter stops wage garnishment faster?
Both chapters stop wage garnishment the moment you file through the automatic stay. Speed of filing matters more than chapter choice. Emergency filings can happen within 24 hours if garnishment is imminent.

Do I lose my tax refund in bankruptcy?
Chapter 7 trustees can claim tax refunds as assets. Strategic timing matters. Filing after receiving and spending your refund on necessities avoids this issue. Chapter 13 treats refunds as income that may require turnover depending on your plan terms.

Can my spouse file separately while I file jointly?
You can file individually even if married. Joint debts remain the responsibility of the non-filing spouse. Sometimes one spouse files Chapter 7 while the other files Chapter 13 or does not file at all.

What percentage of debt do Chapter 13 filers actually pay?
Unsecured creditors in Chapter 13 receive anywhere from 0% to 100% depending on debtor income and assets. Most plans pay between 10% and 30% of unsecured debt. Priority debts and secured arrears receive 100%.

Does Chapter 7 or 13 affect my ability to rent an apartment?
Both chapters appear on credit reports and landlords may see them. Chapter 7 filers often have better luck because their debt is gone and income is fully available for rent.