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Chapter 7 is generally a liquidation proceeding: a trustee may sell nonexempt property, and there is no repayment plan. Chapter 13 is a court-supervised repayment plan for individuals with regular income; debtors generally retain property while making payments for three to five years. Which chapter may fit depends on eligibility, assets, debts, and the ability to meet a feasible plan—not on one factor alone.
This is a general U.S. bankruptcy overview, not a personal legal conclusion. Exemptions, liens, discharge rules, and eligibility depend on current law and individual circumstances. For advice about a particular debt, asset, or filing, consult competent bankruptcy counsel and check current court guidance.
Chapter 7 vs. Chapter 13 at a glance
| Question | Chapter 7 | Chapter 13 |
|---|---|---|
| Basic process | Liquidation; a trustee may sell nonexempt assets and distribute proceeds under the Bankruptcy Code. There is no repayment plan. | An individual with regular income proposes a court-approved repayment plan, with payments distributed by a trustee. |
| Eligibility | Means-test rules can apply to individual debtors with primarily consumer debts, along with other requirements. | Requires regular income and compliance with statutory debt limits and other requirements. |
| Property | Applicable exemptions can protect qualifying property; liens and security interests require separate consideration. | Debtors generally retain property while performing the plan. Nonexempt property value can affect what unsecured creditors must receive. |
| Payments and timing | No Chapter 13-style plan; case timing depends on the case and any issues to resolve. | Plans usually last three to five years, and plan completion is generally required before discharge. |
| Mortgage arrears | Does not provide the Chapter 13 plan process for catching up on arrears over time. | May allow a debtor to cure past-due mortgage payments over time, but does not erase ongoing payments or guarantee that a home will be kept. |
| Debts after the case | Many debts may be discharged, but statutory exceptions apply. | Discharge generally follows plan completion and satisfaction of additional conditions; exceptions also apply. |
How Chapter 7 works
Chapter 7 is often called liquidation bankruptcy. A trustee gathers and may sell nonexempt assets, then distributes proceeds to creditors according to the Bankruptcy Code. Exemptions may let a debtor retain qualifying property, but their scope depends on applicable law. Liens and security interests can affect property even when personal liability for a debt is discharged.
The United States Courts states: “A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13.” Individual debtors with primarily consumer debts may need to complete a means test. It is a statutory calculation that includes allowable expenses, not simply an income cutoff. Some debtors may face a presumption of abuse under the calculation.
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Chapter 7 can discharge many debts, but not every obligation. The United States Courts identifies exceptions that include domestic support obligations, certain taxes, certain education-related debts, and certain injury-related debts. The treatment of a particular debt depends on the law and facts; do not assume it will be discharged without legal advice.
How Chapter 13 works
Chapter 13 is an adjustment-of-debts proceeding for individuals with regular income, including some self-employed people and people operating an unincorporated business, subject to statutory requirements. The debtor proposes regular payments to a trustee, who distributes funds under the plan. The plan must meet legal requirements and be feasible.
Plans usually last three to five years. The required period depends in part on income relative to the applicable state median, and a plan cannot run longer than five years. A debtor generally must complete plan payments and meet additional conditions before receiving a discharge.
Chapter 13 may help a homeowner catch up on past-due mortgage payments over time. Filing generally triggers an automatic stay against many collection actions, subject to exceptions. It does not eliminate ongoing mortgage obligations or guarantee that a home will be retained. It also does not reverse a foreclosure sale that was completed before filing, and missed mortgage payments after filing can still put the home at risk.
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Chapter 13 eligibility includes statutory debt limits. The United States Courts page retrieved for this guide reports unsecured debt below $526,700 and secured debt below $1,580,125. These figures can change, so check current law and official guidance for the relevant filing date before relying on them.
Questions to consider before comparing chapters
- Can you meet the Chapter 7 requirements? Means-test rules may apply to individual consumer debtors, and other eligibility and procedural requirements may matter.
- What property do you own, and what exemptions apply? State law, federal options where available, asset values, and liens can affect what property is at risk or protected.
- Can you sustain a Chapter 13 plan? Consider whether regular income can support plan payments over three to five years while meeting ongoing expenses and secured obligations.
- Are mortgage arrears or other secured debts a central concern? Chapter 13 may offer a way to catch up on arrears, but timing, foreclosure status, and future payment capacity matter.
- Which debts may be discharged? Some debts survive bankruptcy, and discharge exceptions differ between chapters. Prior cases can also affect discharge eligibility.
- What current rules apply? Debt limits, forms, exemptions, and local procedures may change or depend on the filing date and jurisdiction.
Do not choose a chapter based only on income, total debt, or a desire to keep one asset. The United States Courts advises potential Chapter 7 debtors to consult competent legal counsel about the scope of discharge. Current court forms and local instructions should also be checked; credit counseling is a filing requirement subject to exceptions.
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What is the difference between Chapter 7 and Chapter 13 bankruptcy?
Chapter 7 is generally a liquidation proceeding with no repayment plan, though a trustee may sell nonexempt assets. Chapter 13 uses a court-approved repayment plan for an individual with regular income, usually lasting three to five years.
Does Chapter 7 eliminate all debt?
No. Chapter 7 can discharge many debts, but statutory exceptions apply, including categories such as domestic support obligations, certain taxes, certain education-related debts, and certain injury-related debts. Whether a specific debt is dischargeable requires a review of the law and facts.
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Can Chapter 13 stop foreclosure and save my home?
Chapter 13 may allow a debtor to catch up on past-due mortgage payments over time, and the automatic stay generally halts many collection actions subject to exceptions. It does not guarantee that a home will be kept, reverse a foreclosure sale already completed before filing, or excuse ongoing mortgage payments.
What are the Chapter 13 debt limits?
The United States Courts page retrieved for this guide reports unsecured debt below $526,700 and secured debt below $1,580,125. Because statutory limits can change, verify current official guidance for the intended filing date.
Should I file Chapter 7 or Chapter 13?
That depends on eligibility, income, assets and exemptions, debt types, mortgage arrears, and whether you can complete a repayment plan. These general differences cannot determine the right chapter for an individual; consult competent bankruptcy counsel.
Quick Recap
Sources
- United States Courts: Chapter 7 – Bankruptcy Basics
- United States Courts: Chapter 13 – Bankruptcy Basics
- United States Courts: Discharge in Bankruptcy – Bankruptcy Basics
- United States Courts: Bankruptcy Forms
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