What Are the Differences Between Chapter 7 & Chapter 13?

Which Type of Bankruptcy is Right For You?

All chapters of bankruptcy allow a debtor (the person filing bankruptcy) to eliminate the obligation to pay most debts. Of course, like any program the government creates, there are advantages and disadvantages between the various chapters, as well as different requirements in order to qualify for the various chapters. A complete discussion of all of the various chapters in the bankruptcy code is beyond the scope of this website, so this site is focused on Chapter 7 & Chapter 13 only.

The charts below address some of the more important differences between Chapter 7 & Chapter 13. For more information on the advantages of Chapter 7, click here. For more information on the advantages of Chapter 13, click here. If you want to learn more about the process of Chapter 7, click here. If you want to learn more about the process of Chapter 13, click here.


How long does it take to obtain a discharge?
Chapter 7 Chapter 13
Typically 4-5 months from beginning to end. 3-5 years depending on the debtor's income.
What are the costs?
Chapter 7 Chapter 13
The filing fee is $306. Attorney fees in Orange County for an attorney-handled Chapter 7 average between $1500 and $2500 depending on complexity. Because all debts existing at the time of filing are included in the case, all attorneys require that all fees be paid before filing the case. The filing fee is $274. Attorney fees in Orange County for an attorney-handled Chapter 13 typically start around $400 - $5500 depending on complexity. However, challenges by creditors and the trustee can cause the fees to go much higher. The court must approve all additional attorney fees after the case is filed.
What are the requirements to qualify for each chapter?
Chapter 7 Chapter 13
In order to qualify for Chapter 7, the debtor's income may not exceed certain limits set by Congress. These limits are revised each year and are based on the number of people in the debtor's household. In order to qualify for Chapter 13, the debtor's debts may not exceed limits established by Congress. These limits are based on the type of debt and not the debtor's income.
Are there exceptions to the qualification requirements?
Chapter 7 Chapter 13
Yes. If the debtor's debts are primarily (more than 50% of debts) non-consumer debts (business debts, taxes, etc.) then the debtor's income is irrelevant and the debtor qualifies for Chapter 7. No, the debt limits are strictly enforced. It is critical that the debts be properly classified in order to prevent disqualification after filing Chapter 13.
Do I have to make payments to my creditors during the bankruptcy proceedings?
Chapter 7 Chapter 13
No. All qualified debts are eliminated and no payments are made to these creditors. The debts that are not eliminated remain owing after the discharge is obtained and are addressed outside of bankruptcy. Yes. Debtors make payments during the term of the bankruptcy to the trustee for distribution to unsecured creditors. The amount of the payments are determined by the debtor's monthly disposable income, not the amount of debt. The amount a debtor pays to the unsecured creditors ranges from 0% to 100% depending on the circumstances.
Do I get time to make up past-due payments on debts that are secured by property I wish to keep?
Chapter 7 Chapter 13
No. Chapter 7 does not provide time for the debtor to bring past-due loans current. The debtor may be able to negotiate with the lender to bring the loan current. In order to keep property secured by a loan after discharge, the debtor must remain current on the loan. Yes. Debtors are given up to 60 months to make up past-due payments on debts secured by property the debtor wishes to keep. Loans secured by property the debtor does not wish to keep do not need to be repaid.
When can I start obtaining new credit such as credit cards and loans?
Chapter 7 Chapter 13
Once the discharge is obtained, the debtor is generally able to incur new debts right away, even to buy a new car. This allows the debtor to rebuild a credit score in as few as 1-2 years after discharge. Generally, a debtor in Chapter 13 must wait until discharge before incurring new debt. However, if it becomes necessary for the debtor to incur new debt before discharge, the debtor must obtain approval. After discharge is granted, the debtor is able to incur new debt. And like Chapter 7 debtors after discharge, credit is generally readily available.
Does filing bankruptcy stop my creditors from harassing me with phone calls and collection letters?
Chapter 7 Chapter 13
Yes. Immediately upon filing your case, a Federal law called the "Automatic Stay" comes into effect. This law precludes creditors from taking any collection action against a debtor during the bankruptcy case. Every creditor must stop all collection action or be faced with a lawsuit by the debtor. Yes. Immediately upon filing your case, a Federal law called the "Automatic Stay" comes into effect. This law precludes creditors from taking any collection action against a debtor during the bankruptcy case. Every creditor must stop all collection action or be faced with a lawsuit by the debtor.
Does filing bankruptcy stop foreclosure?
Chapter 7 Chapter 13
Yes. Immediately upon the filing of the case, the "Automatic Stay" comes into place and the creditor must stop the foreclosure. However, about 2 months after Chapter 7 is filed, the lender will generally obtain permission from the court to continue the foreclosure. This still gives the debtor 2 months or so to stay in the house and find a new place to live. Yes. Immediately upon filing the bankruptcy case, the "Automatic Stay" comes into place and the creditor must stop the foreclosure. Unlike Chapter 7 however, in Chapter 13 the debtor has the choice to keep the house if at all possible. For more info click here.
Does filing bankruptcy stop lawsuits, wage garnishments, and repossessions?
Chapter 7 Chapter 13
Yes. Immediately upon filing your case, a Federal law called the "Automatic Stay" comes into effect. This law precludes creditors from taking any collection action against a debtor during the bankruptcy case. As lawsuits, garnishments, and repossessions are attempts to collect on a debt, they fall within the Automatic Stay provisions and must be halted. Failure to comply with the law subjects the creditor to a lawsuit by the debtor. The penalties can be severe for the creditor. Yes. Immediately upon filing your case, a Federal law called the "Automatic Stay" comes into effect. This law precludes creditors from taking any collection action against a debtor during the bankruptcy case. As lawsuits, garnishments, and repossessions are attempts to collect on a debt, they fall within the Automatic Stay provisions and must be halted. Failure to comply with the law subjects the creditor to a lawsuit by the debtor. The penalties can be severe for the creditor.
Can I keep my personal property?
Chapter 7 Chapter 13
Generally, most debtors are able to keep all of their personal property. The exception is property that has substantial equity and can't be protected under the bankruptcy code. This type of property is generally taken and sold by the trustee unless the debtor can pay the trustee the value of the property. Like chapter 7, most debtors are able to keep all of their personal property. For property that has substantial equity and would normally be subject to sale, there are other options in Chapter 13.
How does bankruptcy deal with my unpaid taxes?
Chapter 7 Chapter 13
Chapter 7 does not provide any time to repay taxes so all tax debt that is non-dischargeable is dealt with outside of bankruptcy. For more info on the treatment of taxes in bankruptcy, click here. Chapter 13 provides the debtor with a safe haven of 60 months to pay outstanding taxes without interference by the taxing authority. Remember, other debts are eliminated in bankruptcy that frees up money each month that can be used for the unpaid taxes.

If You Have More Questions


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