Chapter 7 bankruptcy sells off non-exempt property to pay creditors, usually finishes in a few months, and does not require a repayment plan. Chapter 13 bankruptcy lets you keep your property and pay debts through a court-approved plan over three to five years. Which one fits depends on your income, your assets, and whether you are trying to save a home from foreclosure. This is general federal bankruptcy information, not legal advice for your situation.
Where This Information Comes From
This guide is based on Bankruptcy Basics, published by the Administrative Office of the U.S. Courts, and consumer resources from the Consumer Financial Protection Bureau (CFPB). Bankruptcy is federal law under Title 11 of the U.S. Code, so the core rules apply in all 50 states. However, exemption laws (what property you can keep), median income figures, and local court procedures vary by state and by federal judicial district. Always confirm current numbers and local rules with your federal court district before filing.
Chapter 7: Liquidation
Chapter 7 is sometimes called “liquidation” bankruptcy. A court-appointed trustee sells your non-exempt property and uses the proceeds to pay creditors. Many Chapter 7 cases are “no asset” cases, meaning everything the filer owns is protected by exemptions, so nothing gets sold.
Key features of Chapter 7:
- No repayment plan is required.
- Available to individuals, partnerships, and corporations, though only individuals receive a discharge of debt.
- Most individual filers receive a discharge within a few months of filing.
- An automatic stay stops most collection calls, lawsuits, and wage garnishments as soon as the case is filed.
- Some property is exempt (protected) under federal or state law and cannot be taken by the trustee.
Chapter 13: Repayment Plan
Chapter 13 is for individuals with regular income who want to keep their property and pay back debt over time. It is sometimes called a “wage earner’s plan.”
Key features of Chapter 13:
- Repayment plans run three to five years, depending on your income compared to your state’s median income for a household your size.
- You can catch up on missed mortgage payments and stop a foreclosure while the plan is in effect.
- You must keep making new mortgage and other secured payments as they come due during the plan.
- The plan must pay priority debts (like most taxes) in full and give unsecured creditors at least as much as they would get in a Chapter 7 case.
- A discharge is granted after all plan payments are completed, not at the start of the case.
Chapter 7 vs. Chapter 13: Key Differences
- Basic approach: Chapter 7 sells non-exempt property to pay debts. Chapter 13 repays debts over a court-approved plan.
- Typical length: Chapter 7 usually takes a few months. Chapter 13 takes three to five years.
- Who can file: Chapter 7 is open to individuals, partnerships, and corporations, though only individuals receive a discharge. Chapter 13 is for individuals with regular income, including self-employed people.
- Keeping your home if you’re behind on payments: Chapter 7 is not designed to stop foreclosure long-term. Chapter 13 lets you catch up on missed payments through the plan.
- Income test: Chapter 7 requires a means test if your income is above the state median. Chapter 13 has no means test, but plan length depends on your income compared with the state median.
- Discharge timing: A Chapter 7 discharge usually comes 60 to 90 days after the creditors’ meeting. A Chapter 13 discharge comes after all plan payments are completed.
Eligibility and the Means Test
Chapter 7 eligibility for individuals with mostly consumer debt depends on the “means test.” If your household income is below your state’s median income for a household your size, you generally pass automatically. If it’s above the median, the court applies a formula involving your income, allowed expenses, and secured debt payments to see if your case would be considered a presumptive abuse of Chapter 7. A finding of presumed abuse can be overcome only by showing special circumstances.
Chapter 13 has its own eligibility limits based on the total amount of your secured and unsecured debt, which are adjusted periodically by the courts. Because both the state median income figures and the debt limits change over time, verify the current numbers for your state directly through the U.S. Courts Bankruptcy Basics pages before you file.
Before filing under either chapter, individuals must also complete credit counseling from an approved agency within 180 days before filing, with limited exceptions for emergencies.
What Happens to Your Debts and Property
In both chapters, filing creates an “automatic stay” that stops most collection calls, lawsuits, and wage garnishments right away. In Chapter 7, a trustee may sell non-exempt property; most filers keep everything covered by exemptions. In Chapter 13, you generally keep your property as long as you make your plan payments.
Neither chapter erases every debt. Common examples of debts that usually are not discharged include most child support and alimony, many types of taxes, most government-backed student loans, and debts from certain injuries caused by drunk driving. Chapter 13 discharges are somewhat broader than Chapter 7 in a few specific areas, such as debts from property settlements in divorce.
What to check before acting on Bankruptcy Basics
Whichever chapter you’re considering, start gathering this information early:
- A complete list of creditors, account numbers, and amounts owed.
- Proof of income for the last six months (pay stubs, benefit statements, self-employment records).
- A list of everything you own, including vehicles, real estate, and financial accounts.
- A detailed monthly budget of living expenses (housing, food, utilities, transportation, medical).
- Your most recent tax return.
- Proof of completed credit counseling from an approved agency.
- Mortgage statements if you’re trying to stop a foreclosure.
How to act on what you know about Bankruptcy Basics
- Your income is below your state’s median and you have little property to protect: Chapter 7 may resolve debts faster, but confirm eligibility using the current means test.
- You’re behind on mortgage payments and want to keep your home: Chapter 13 is generally built for catching up past-due payments over time.
- Your income is above the state median or you don’t pass the means test: Chapter 13 may be the required path rather than Chapter 7.
- You have secured debt (like a car loan) you want to keep paying under new terms: Chapter 13 allows rescheduling some secured debts.
- You’re not sure which applies to you: A licensed bankruptcy attorney or your local court’s self-help resources can review your specific numbers.
Jurisdiction Limits and Where to Verify Details
Bankruptcy is filed in federal court, and the core rules come from the U.S. Bankruptcy Code, so they apply nationwide. However, several things vary by location and by your personal facts:
- Which property exemptions apply (some states use federal exemptions, others require state exemptions).
- Current state median income figures used in the means test and plan-length calculation.
- Current debt limits for Chapter 13 eligibility.
- Local court procedures, forms, and filing fee waiver rules.
Because these figures are updated periodically, verify current numbers directly through the U.S. Courts Bankruptcy Basics pages or your local federal bankruptcy court before filing. For general consumer debt and complaint resources, see the Consumer Financial Protection Bureau’s complaint tool.
When to Talk to a Licensed Attorney
This article explains general concepts so you can ask better questions, not what to do in your specific case. Talk to a licensed bankruptcy attorney, or contact a court self-help center or legal aid provider, if any of the following apply: a foreclosure or repossession is scheduled soon, a creditor has sued you, you’re unsure which chapter you qualify for, you have significant assets you want to protect, or you have questions about which debts will or won’t be discharged. Court clerks and trustees cannot give legal advice.
For help finding a resource that matches your question, see our guide to choosing the right kind of legal help. You can also review our sourcing and fact-checking standards, our editorial standards, and our legal information disclaimer for more on how we build guides like this one.
Common questions about Bankruptcy Basics
Can I file for bankruptcy without a lawyer?
Yes, this is called filing “pro se.” The U.S. Courts publish self-help information for people filing without an attorney, but bankruptcy law is complex, and mistakes can affect which debts get discharged. Many people still choose to hire an attorney, especially for Chapter 13.
Will bankruptcy stop all collection calls and lawsuits immediately?
Filing creates an automatic stay that generally stops most collection calls, lawsuits, and wage garnishments right away. Some actions are not covered, and the stay can end early in certain situations, so check your case specifics with the court or an attorney.
Do I lose my house if I file Chapter 7?
Not necessarily. If your home equity is protected by an exemption, you may keep it. But Chapter 7 does not include a mechanism to catch up missed mortgage payments the way Chapter 13 does, so it is not designed to stop an active foreclosure long-term.
How long does bankruptcy stay on my credit report?
This is determined by credit reporting rules rather than the Bankruptcy Code itself, and it can vary by chapter and by credit bureau. Check current credit reporting guidance directly with the credit bureaus or the CFPB.
Educational Information, Not Legal Advice
This article provides general, plain-language education about federal bankruptcy law. It is not legal advice, does not predict the outcome of any case, and does not create an attorney-client relationship. Bankruptcy outcomes depend on your specific facts, your state’s exemption laws, and current federal figures that change over time. For advice about your situation, consult a licensed attorney in your state or contact your local federal bankruptcy court or a legal aid organization.