Chapter 7 vs Chapter 13 Bankruptcy: The Real Differences in 2026
Both chapters stop collections the moment you file. What happens after that is completely different — and picking the wrong one can cost you your house or your case.
The One-Line Difference
- Chapter 7 is liquidation. The court discharges (erases) qualifying unsecured debt — credit cards, medical bills, personal loans — usually within 3 to 6 months. A trustee may sell non-exempt assets to pay creditors, though most filers keep everything under state exemption rules.
- Chapter 13 is reorganization. You keep your property and repay creditors over a 3 to 5 year court-approved plan, then the remaining qualifying balance is discharged.
Side-by-Side
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Timeline | 3-6 months | 3-5 years |
| You pay back | Usually nothing to unsecured creditors | A portion, based on income |
| Keeps your house | Only if current on payments | Yes — can cure missed payments |
| Credit report | Up to 10 years | Up to 7 years |
| Eligibility | Must pass the means test | Must have regular income under debt limits |
| Filing fee (court) | Roughly $338 | Roughly $313 |
Who Qualifies for Chapter 7
You must pass the means test: your income is compared to your state median, and if it's too high, the court looks at your actual disposable income. High earners usually get pushed into Chapter 13.
You also generally can't file Chapter 7 again if you received a Chapter 7 discharge in the last 8 years (or Chapter 13 in the last 6).
When Chapter 13 Is the Better Choice
- You're behind on your mortgage and want to stop foreclosure. Chapter 13 lets you spread the arrears across the plan while keeping the house.
- You have non-exempt assets you'd lose in a Chapter 7.
- You have debts Chapter 7 can't erase — recent taxes, child support, student loans in most cases. Chapter 13 can manage them under a structured plan.
The Credit Impact Is Real, But Not Permanent
A Chapter 7 stays on your report for up to 10 years, Chapter 13 for 7. That sounds brutal, but the bigger driver of your score is what happens next: on-time payments, low credit utilization, and no new delinquencies. Many filers see meaningful recovery within 18-24 months, and some qualify for a mortgage again in as little as 2 years after Chapter 13.
Before filing anything, run the numbers with our Debt-to-Income Ratio Calculator — you may find a repayment plan beats filing, or you may confirm that bankruptcy is genuinely the only way out. Both are useful answers.
Bankruptcy is a legal tool, not a moral verdict. Get the means test right, understand which chapter protects what you can't afford to lose, and talk to a licensed attorney in your state before filing.
*This article is educational and is not legal or financial advice. Bankruptcy rules, exemptions, and fees vary by state and change over time — verify current figures with a qualified attorney or the U.S. Courts website.*