Chapter 7 vs. Chapter 13

What is the difference between a Chapter 7 or a Chapter 13 bankruptcy?


Chapter 7

Chapter 13

Type of Bankruptcy



Who Can File?

Individuals and Business Entities

Individuals Only (including Sole Proprietors)

Eligibility Restrictions

Disposable Income Must Be Low Enough to Pass the Chapter 7 Means Test

Debtor cannot have more than  $394,7255 of unsecured debt or $1,184,200 of Secured Debt

How Long Does It Take to Receive a Discharge?

Typically Three to Five Months

Upon Completion of All Plan Payments (Usually Three to Five Years)

What Happens to Property in Bankruptcy?

Trustee Can Sell All Nonexempt Property to Pay Creditors

Debtors Keep All Property But Must Pay Unsecured Creditors an Amount Equal to Value of Nonexempt Assets

Allows Removing Unsecured Junior Liens from Real Property Through Lien Stripping?


Yes (If Requirements Are Satisfied).

Allows Reducing the Principal Loan Balance on Secured Debts Through a Loan Cramdown?


Yes (If Requirements Are Satisfied).


Allows Debtors to Quickly Discharge Most Debts and Get a Fresh Start

Allows Debtors to Keep Their Property and Catch Up on Missed Mortgage, Car, and Nondischargeable Priority Debt Payments


Trustee Can Sell Nonexempt Property. Does Not Provide a Way to Catch Up on Missed Payments to Avoid Foreclosure or Repossession.

Must Make Monthly Payments to the Trustee for Three to Five Years. Depending on income or assets, may Have to Pay Back a Portion of General Unsecured Debts.

This article was last updated on Friday, February 16, 2018.

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Linda Littlefield
Linda Littlefield