When people think about filing bankruptcy, they often picture one big, scary process. The truth? Bankruptcy isn’t one-size-fits-all. In fact, most individuals file under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Knowing the difference can help you make a smart decision about your financial future.
What Is Chapter 7 Bankruptcy?
Chapter 7 is often called “liquidation bankruptcy.” That sounds harsher than it really is. In most cases, people keep the essentials they need to live — their home (if current on payments), a car, retirement accounts, and personal belongings. Creditors may only get paid if you have significant non-exempt property, which is rare.
Best for: People with limited income who can’t realistically repay their debts.
What it does: Wipes out most unsecured debts like credit cards, personal loans, and medical bills.
Timeline: Usually takes about 3–6 months from start to finish.
What Is Chapter 13 Bankruptcy?
Chapter 13 is known as “reorganization bankruptcy.” Instead of wiping debts away right away, you commit to a 3- to 5-year repayment plan that’s based on your income and budget. At the end of the plan, remaining eligible debt is discharged.
Best for: People with steady income who want to catch up on missed mortgage or car payments, or who don’t qualify for Chapter 7.
What it does: Lets you keep assets while paying down debt in an affordable, court-approved plan.
Timeline: 3–5 years, but collection calls, wage garnishments, and lawsuits stop immediately.
Key Differences Between Chapter 7 and Chapter 13
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Who Qualifies | Those who pass a “means test” (lower income) | Individuals with regular income |
| Length of Case | 3–6 months | 3–5 years |
| Debt Discharge | Most unsecured debts erased | Debts reduced/repaid, then discharged |
| Property Risk | Non-exempt assets may be sold (rare) | You keep your property if you follow the plan |
| Best For | Quick fresh start | Catching up on missed payments, higher earners |
Which One Is Right for You?
The answer depends on your income, your assets, and your financial goals. If you need fast relief and don’t have extra income to repay debts, Chapter 7 may be the best path forward. If you’re behind on a mortgage or car loan but can afford monthly payments, Chapter 13 may give you the breathing room you need. Either way, bankruptcy is not the end of your financial story — it’s the beginning of a new one.
Talk to a Bankruptcy Attorney About Your Options
Choosing between Chapter 7 and Chapter 13 isn’t something you should do alone. An experienced bankruptcy lawyer can review your situation, explain your options, and help you build a plan to move forward with confidence.
Want to know more about the difference between Chapter 7 Vs. Chapter 13 in California? You can call 888.845.9190 to speak with a San Diego bankruptcy attorney and debt relief lawyer from San Diego Legal Pros. We have more than 15 years of total legal experience and offer free consultations to inquiring clients.