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Bankruptcy: Chapter 7 vs Chapter 13

Chapter 7 and Chapter 13 insolvency are two altogether different legitimate choices with various expected results. However, both can help borrowers who are stuck between a rock and a hard place underwater.

The primary isolating line between petitioning for Chapter 7 or to petition for Chapter 13 bankruptcy is salary level. Filing Chapter 7 means you have to sell some part of your property, whereas filing Chapter 13 means your property will not be sold.

Let’s know more in detail about how Chapter 7 differs from Chapter 13:

Chapter 7 bankruptcy:

Chapter 7 bankruptcy is otherwise known as Liquidation bankruptcy. This is the common type of bankruptcy filed when you are no longer able to pay your unsecured debts like medical bills, credit card bills and personal loans.

Before filing for chapter 7 always take care of the eligibility norms. To check if you are eligible for applying Chapter 7 here is a quick list:

Apply for Chapter 7 if

  • Your debts total is more than half of your income.
  • You have no or less income.
  • You don’t have any asset.
  • The debt will take 5 years or more to pay off even if you take extreme majors.
  • Your debt is harming an essential part of your life.
  • Your monthly income is below the level of the median in your state.

Chapter 13 bankruptcy:

Famously known as reorganization bankruptcy, Chapter 13 otherwise called Wage Earner’s bankruptcy. The main feature of Chapter 13 is that you can keep your house or other mortgages safe as long as you are paying the debt. If you successfully completed the repayment plan in between 3 to 5 years as ordered by the court, then you can keep your property.

This chapter helps you repay most of your debt, but not all.

Chapter 13 also has some eligibilities, majors, as follows:

  • Shouldn’t have high debt. There is a debt amount of limitation.
  • Can’t file chapter 13 against business debt. (except sole proprietor)
  • You should be employed and have enough income to repay the monthly installments.
  • An up to date tax filing 

Difference between Chapter 7 and Chapter 13 Bankruptcy:


  Type of Bankruptcy






Who can file


Business or Individuals


Only Individual(Exception: Sole Proprietors)


  Eligibility Criteria


Disable income must be low


Cannot Have More Than $419,275 of Unsecured Debt or $1,257,850 of Secured Debt (as of April 2019)


  When will you receive a discharge?


Usually takes 3 to 4 months


3 to 5 years(depending on how soon you complete plan payments)


  What happens to property in Bankruptcy?


Trustee has the audacity to sell your non-exempt property to pay the creditors


As long as debtor paying unsecured creditor(amount equal to the value of non-exempt assets)


Benefits Debtors can fresh start quickly after the discharge of most debts


Allows debtor to keep their property and catch up of mortgages, car and non-dischargeable priority debt payments




Trustee can sell your property(non-exempt), No catch up on missed payment to avoid repossession.



Compulsory monthly payments to the trustee for 3 to 5 years straight to avoid discrepancies. Possibly have to pay back a portion of unsecured debt



  1. Will I lose my property if I file bankruptcy?

The most important question when you go for filing bankruptcy is what will happen to your property.

So, we are trying to explain it as simply as possible for your better understanding.

Chapter 7:

Most of the possession and property will be sold to pay the creditors (this is why people who don’t have homes choose chapter 7). Some personal properties are exempted for being sold (there are limits on value exemption).

 Chapter 13:

In Chapter 13, you agree to repay the debts as per the order of the court so, no property or asset sold. The period ranges from 3 to 5 years (depending on your regular income).

  1. Can I get rid of Credit Card Debt if I file Chapter 7 or Chapter 13 Bankruptcy?

Yes, both Chapter 7 and 13 allows credit card debt to be discharged.

If you get Chapter 7, your unsecured debts including credit card, utility bills, personal loan or medical bills get wiped out.

In chapter 13 you have to repay your unsecured debt successfully by the order of court. The remaining debt will be discharged after that.

  1. How long will a Chapter 7 or Chapter 13 Bankruptcy stay on my credit reports and impact my credit scores?

Chapter 7: up to 10 years.

Chapter 13: up to 7 years.

Till this time there will be a negative impact on your credit scores, and bankruptcy will be listed on your credit report. With time the impact will be less.


In this article, I have explained every difference in Chapter 7 and Chapter 13. Go through thoroughly to know which one suits your current situation.

Always hire an Experienced Bankruptcy Lawyer to get maximum good results of filing bankruptcy. The experienced attorney can help and guide you with the utmost service.

To consult an expert  Chapter 7 Bankruptcy Attorney and Chapter 13 Attorneys in Tucson Click here

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