The Moneymagpie Team
16 June 2026
Study Time: 5 minutes
One of the most common questions people ask when considering bankruptcy is this: “What is the difference between a Chapter 7 and a Chapter 13 bankruptcy?”
It’s a fair question because the two options can feel confusing at first. Both are types of bankruptcy. Both can help you deal with even bigger debts. But they work in a very different way.
An easy way to remember the difference is this: Chapter 7 is usually faster. Chapter 13 usually takes a long time.
Chapter 7 bankruptcy is usually completed in a few months. Chapter 13 bankruptcy usually involves a payment plan that takes 3 to 5 years.
Another simple difference is cost. Chapter 7 tends to cost less overall. Chapter 13 can be very expensive because it often involves attorney fees, trustee fees, and monthly plan payments over several years.
That said, Chapter 7 may not always be the best option. Chapter 13 may 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 be right for your situation.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is often referred to as bankruptcy. That sounds scary, but most people who file Chapter 7 don’t lose 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, the bankruptcy trustee reviews your assets. If you own property that is not protected by bankruptcy, the trustee may be able to sell the property and use the proceeds to pay off creditors.
However, most Chapter 7 cases are “non-asset”. That means no property is available for the trustee to sell because the filer’s assets are protected by the exemption.
How Does the Means Test Work in a Chapter 7 Case?
Not everyone qualifies for Chapter 7. Most people must pass a means test, which looks at income, household size, expenses, and state-specific median income numbers.
You can use the online Chapter 7 means test calculator to help you estimate whether you qualify below or above the median.
If your income is below the median income for the size of your home in your state, you may easily qualify. If your income is above the median, you may still qualify, but the calculation becomes more detailed.
Chapter 7 may be a good fit for someone with unsecured debts, limited disposable income, and assets secured by the exemption.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is often called a payment system bankruptcy or a salary system.
Instead of wiping out eligible debts immediately, Chapter 13 creates a monthly payment plan. The program usually lasts 3 to 5 years.
Your Chapter 13 discharge may depend on several factors, including income, expenses, debts, assets, mortgages, car loans, taxes, attorney’s fees, trustee’s fees, and non-dischargeable equity.
Chapter 13 is usually for people with ordinary income. This can include salary, self-employment income, retirement income, or other fixed income.
Why Someone Might File Chapter 13
People often file Chapter 13 when they need more than an unsecured debt discharge.
For example, Chapter 13 can help if you are behind on your mortgage and want to stop foreclosure. It may also help if you are behind your car and want to stop it.
Chapter 13 can also help protect property that may be at risk in Chapter 7. Instead of having the trustee sell the property, you can keep it and pay creditors through your settlement plan.
Chapter 7 vs Chapter 13: Key Differences
The main difference between Chapter 7 and Chapter 13 is how debts are handled. The process of filing bankruptcy is essentially the same, but let’s talk about the differences.
In Chapter 7, eligible debts can be discharged without a lengthy payment plan. In Chapter 13, you make monthly payments on a court-approved plan.
Time
Chapter 7 is usually the fastest. Most simple Chapter 7 cases are completed in about 4 to 6 months.
Chapter 13 usually takes 3 to 5 years. That is a very long commitment, and requires ongoing monthly payments.
Costs
Chapter 7 tends to cost less overall. Attorney fees are usually lower because the case is shorter and less serious.
Chapter 13 attorney fees are often high, but some attorneys allow a portion of the fee to be paid through a settlement plan. This can make Chapter 13 easier to file up front, but can be more expensive in the long run.
Property
In Chapter 7, an area not protected by the exemption can be at risk.
In Chapter 13, you usually keep your property, but your plan payment may need to count the amount of assets that can be exempted.
Home and Car Payments
Chapter 7 may help eliminate unsecured debt, but it usually doesn’t give you years to contribute to a house or car payment.
Chapter 13 may allow you to participate in the mortgage or car payments that you had to make over time, which may be helpful in stopping foreclosure or repossession.
Advantages and Disadvantages of Chapter 7 Bankruptcy
Benefits of Chapter 7
Chapter 7 can be the fastest way to get out of debt. It can eliminate many unsecured debts without requiring years of repayment. In addition, there are many inexpensive ways to file for Chapter 7 bankruptcy.
It usually costs less than a Chapter 13. It can also help if you have less cash to spend and can realistically afford a payment plan.
Chapter 7 may also allow you to donate an asset you can no longer afford, such as a car with a high payment, and discharge the outstanding balance.
Chapter 7 Mischief
The biggest risk in Chapter 7 is losing property. If you have assets that are not covered by the exemption, the trustee may be able to sell them.
Chapter 7 may not be right for you if you are behind on a mortgage or car loan and want to keep the property. It can temporarily stop the collection, but it usually does not create a long-term holding plan.
Also, some debts do not go away in Chapter 7, such as child support, alimony, many tax debts, and most student loans.
The Pros and Cons of Chapter 13 Bankruptcy
Benefits 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 a relapse and allow you to keep the car.
Chapter 13 can be helpful if you have property that could be at risk in Chapter 7. It can also help you manage certain debts that are not easily paid, such as late taxes or support debts.
Another benefit is that some attorney fees can be paid through a Chapter 13 plan instead of all of them up front.
Disadvantages of Chapter 13
Chapter 13 takes longer than Chapter 7. A 3 to 5 year repayment plan is an important commitment.
The monthly payment can be difficult to maintain. If your income goes down or expenses go up, the plan may not be affordable.
Chapter 13 is often very expensive, and if the case is dismissed before completion, you may not get the discharge you were hoping for.
How to Decide Between Chapter 7 and Chapter 13
The right choice depends on your specific situation.
Chapter 7 may make sense if you qualify, your property is secure, and most of your debt is unsecured and will not be discharged.
Chapter 13 may make sense if you’re behind on your home or car, have assets you need to protect, don’t qualify for Chapter 7, or need time to pay off certain debts.
Before making a decision, it can be useful to weigh both options. The Chapter 7 vs Chapter 13 calculator can help you compare the eligibility, costs, estimated Chapter 13 payout, timeline, and other possible options.
Talk to a Bankruptcy Attorney
Bankruptcy can be helpful, but it’s 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 estate is secure, and what debts are or may be discharged.
Chapter 7 and Chapter 13 can both provide relief, but they solve different problems. The most important step is to understand your options before installing.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore the information contained herein including opinions, comments, suggestions or strategies is for informational, entertainment or educational purposes only. This should not be taken as financial advice. Anyone considering investing should conduct due diligence.
