Chapter 7 vs. Chapter 13: What Each Bankruptcy Means for Your Debt

Chapter 7 vs. Chapter 13 Bankruptcy: What’s the Difference?

Chapter 7 bankruptcy is faster and cheaper than Chapter 13 bankruptcy, but it could mean selling the things you own.

Written by

Co-written by

Edited by

Edited by other Updated Dec 8, 2025 What's new: What's new: Bankruptcy filings — both personal and business — were up 10.6% in the 12-month period ending September 30, compared with the previous 12 months, according to the Administrative Office of the U.S. Courts. Total filings have increased each quarter since June 2022. Chapter 7 and Chapter 13 are the two most common types of bankruptcy for people in the United States. The biggest difference between Chapter 7 and Chapter 13 is that with Chapter 7, the things you own may be liquidated, and you don’t have to make a plan to pay back your debt. With Chapter 13, you keep your belongings and make a plan to repay your debt over time.

When it makes sense to choose Chapter 7 or Chapter 13 bankruptcy

When it makes sense to choose Chapter 7 or Chapter 13 bankruptcy You might consider Chapter 7 or Chapter 13 bankruptcy if: Your monthly debt payments add up to more than half of your monthly take-home pay. Your creditors are trying to sue you. You see no way to pay off your debt within five years.

Looking for an alternative product to pay down your debt?

Learn more about our debt relief partners below AD AD Accredited Debt Relief Accredited Debt Relief NerdWallet partners with Accredited Debt Relief to provide customers with over $20,000 in credit card debt with consolidation options to help them become debt free in 2-4 years by significantly reducing your monthly payment. Apply now Freedom Debt Relief Freedom Debt Relief NerdWallet partners with Freedom Debt Relief to provide customers with over $7,500 in unsecured debt with settlement options to reduce credit card debt, get one affordable monthly payment, and resolve their debt in as little as 24-48 months. Apply now National Debt Relief National Debt Relief NerdWallet partners with National Debt Relief to provide customers with over $7,500 in unsecured debt with settlement options to help them become debt free in 2-4 years with a total average savings of 23% after fees. Apply now

Chapter 7 vs. Chapter 13 bankruptcy: Key differences

Chapter 7 vs. Chapter 13 bankruptcy: Key differences Chapter 7 and Chapter 13 bankruptcy are different in the way they handle your debt, who’s eligible and how long it takes to complete the process. Most notably, with Chapter 13 bankruptcy, you’ll make a plan to repay all or a portion of your debts to creditors over time and will keep your belongings. With Chapter 7 bankruptcy, you won’t have to make a plan to pay back the debt, but may have to sell nonexempt assets and give the proceeds to creditors. Nonexempt assets aren’t protected by bankruptcy law, so they can be sold. This can include jewelry, or the equity in your house or car if it’s higher than your state’s exemption limit. However, most individual Chapter 7 filings are “no asset” cases where there are no nonexempt items to sell. In these cases, the debt is typically wiped out and creditors aren’t repaid. Chapter 7 bankruptcy is usually best suited for people who don’t have a steady income, and Chapter 13 is best suited for those who do. » LEARN: How often can you file bankruptcy? » LEARN: The table below outlines key differences between Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 vs. Chapter 13

Chapter 7 Chapter 7 Chapter 13 Chapter 13 Form of bankruptcy: Liquidation (property is sold to pay off debt). Form of bankruptcy: Form of bankruptcy: Court-approved repayment plan. Form of bankruptcy: Pros: Pros: One of the fastest routes to resolve overwhelming debt. Filing a bankruptcy petition stops most collection efforts and legal action from creditors. Pros: Pros: Can help you resolve your debts while keeping certain assets or getting caught up on secured debts, like an auto loan or mortgage. Filing a bankruptcy petition stops collection efforts and legal action from creditors. Cons: Cons: Though rare, the trustee can sell nonexempt property. Generally for unsecured debt; does not protect from foreclosure or repossession. Cons: Cons: The length and cost of the repayment plan can be challenging. How long it takes to achieve a discharge: Usually under six months. How long it takes to achieve a discharge: How long it takes to achieve a discharge: Usually three to five years, depending on the repayment plan. How long it takes to achieve a discharge: Mark on credit report: Up to 10 years from filing date. Mark on credit report: Mark on credit report: For seven years from filing date. Mark on credit report: Eligibility: Eligibility: You must pass the means test, which looks at your income, expenses and family size. Can't have had a previous Chapter 7 discharge in the past eight years, or a Chapter 13 in the past six years. Can't have filed a bankruptcy petition (Chapter 7 or 13) in the previous 180 days that was dismissed for certain reasons, such as failing to appear in court or follow court orders. Eligibility: Eligibility: Your unsecured debt can’t be more than $526,700 and secured debt can’t be more than $1,580,125. Must have regular income and be current on tax filings. Can't have had a Chapter 13 filing in the past two years or Chapter 7 in the past four years. Can't have filed a bankruptcy petition (7 or 13) in the previous 180 days that was dismissed for certain reasons, such as failing to appear in court or follow court orders. Must have completed a credit counseling course in the 180 days before filing.

Which is better for you: Chapter 7 or Chapter 13?

Which is better for you: Chapter 7 or Chapter 13? To figure out whether Chapter 7 or Chapter 13 bankruptcy is right for you, meet with a bankruptcy attorney or a nonprofit credit counseling service. You’ll want to make sure that bankruptcy is the right strategy for your debts, and that you’ll be able to make the most of the fresh start that bankruptcy offers. As you compare your options, consider this information:

Most consumers filing for bankruptcy choose Chapter 7

Chapter 7 bankruptcy is faster and cheaper than Chapter 13. Chapter 7 bankruptcy discharges, or erases, eligible debts like credit card bills, medical debt and personal loans. But other debts —such as student loans and taxes — typically are harder to get rid of. Chapter 7 also doesn’t offer a way to get caught up on secured loan payments, like a mortgage or auto loan, and it doesn’t protect those assets from foreclosure or repossession. In some cases, a bankruptcy trustee — an administrator who works with the bankruptcy courts to represent the debtor's estate — may sell nonexempt items, meaning belongings that aren’t protected during bankruptcy. Nonexempt items vary according to state law.

Higher-wage earners may choose Chapter 13

Chapter 13 bankruptcy may be better for people who don’t qualify for a Chapter 7 filing because their income is too high. Some people who qualify for Chapter 7 may still choose to file for Chapter 13 because they want to keep certain assets or get caught up on their mortgage payments. However, Chapter 13 repayment plans are challenging: All disposable income (after certain allowances) has to be put toward repaying debt over three to five years.

Both bankruptcy options will affect your credit

While a bankruptcy filing stays on your credit report for up to 10 years, you can use the opportunity to make a fresh start and take immediate steps to begin rebuilding your credit. » Learn more about rebuilding credit after bankruptcy » Learn more about Explore more on About the authors Pyles Sean Pyles, CFP®, is producer and host of NerdWallet's "Smart Money" podcast. On "Smart Money," Sean talks with Nerds across the NerdWallet Content team to answer listeners' personal finance questions. With a focus on thoughtful and actionable money advice, Sean provides real-world guidance that can help consumers better their financial lives. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests outside of NerdWallet and produces special segments to explore topics like the racial wealth gap, how to start investing and the history of student loans. Before Sean started podcasting at NerdWallet, he covered topics related to consumer debt. His work has appeared in USA Today, The New York Times and elsewhere. When he's not writing about personal finance, Sean can be found tending to his garden, going for runs and taking his dog for long walks. He is based in Portland, Oregon. Published in Schwahn Lauren Schwahn is a writer at NerdWallet who covers credit scoring, debt, budgeting and money-saving strategies. She contributed to the "Millennial Money" column for The Associated Press and managed a team of writers producing content for the series. Her work has also been featured by USA Today, MSN, The Washington Post and more. Lauren has a bachelor’s degree in history from the University of California, Santa Cruz. She is based in San Francisco. Published in WMS™ Kate Ashford is a writer and spokesperson for NerdWallet. She is a wealth management specialist (WMS)™ and certified senior advisor (CSA)® and has more than 20 years of experience writing about personal finance. Previously, she was a freelance writer for both consumer and business publications, and her work has been published by the BBC, Forbes, Money, AARP, LearnVest and Parents, among others. She has a degree from the University of Virginia and a master’s degree in journalism from Northwestern’s Medill School of Journalism. Kate has been quoted by outlets including the Associated Press, MarketWatch, NBC and Fortune. She is based in New York. Published in How to Pay Off Debt: Top Strategies for 2026 Credit Score Ranges: What They Mean and How They Work How to Budget Money in 5 Steps 28 Proven Ways to Save Money What Is Bankruptcy? Definition, Types and What to Know By Sean Pyles How to Deal with Debt Collectors By Sean Pyles, Tommy Tindall, Tiffany Curtis What Is a Debt Management Plan? By Jackie Veling, Sean Pyles Debt Relief: How It Works and Options to Consider By Jackie Veling, Kate Ashford, WMS™