What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 wipes out most unsecured debts in 3–4 months but you may lose non-exempt assets. Chapter 13 creates a 3–5 year repayment plan to pay back some or all debts while keeping your assets. Chapter 7 is for lower-income filers; Chapter 13 is for those with regular income who want to keep property.

How much does it cost to file bankruptcy?

Chapter 7 bankruptcy costs $1,500–$3,500 total (filing fee of $338 plus attorney fees of $1,000–$3,000). Chapter 13 costs $2,500–$6,000 total (filing fee of $313 plus attorney fees of $2,000–$5,000). Fee waivers may be available for low-income filers.

How long does bankruptcy stay on your credit report?

Chapter 7 stays on your credit report for 10 years from the filing date. Chapter 13 stays for 7 years. However, most people see credit score improvement within 1–2 years of filing as debts are discharged and they rebuild credit.

What debts cannot be discharged in bankruptcy?

Student loans (in most cases), child support, alimony, recent tax debts (under 3 years old), court-ordered restitution, and debts from fraud or DUI cannot be discharged in either Chapter 7 or Chapter 13 bankruptcy.

Bankruptcy Guide: Chapter 7 vs Chapter 13 (2026)

Bankruptcy is a legal tool that can eliminate or restructure debt when you’re overwhelmed. It’s not the end — for many people, it’s the fastest path to a real financial fresh start.

Quick answer: Chapter 7 wipes out most unsecured debt in 3–4 months but requires passing a means test. Chapter 13 restructures debt into a 3–5 year payment plan while protecting your assets. About 400,000 Americans file bankruptcy annually.

Chapter 7 vs Chapter 13 Comparison

Feature	Chapter 7	Chapter 13
Timeline	3–4 months	3–5 years
Debt eliminated	Most unsecured debt	Partial — rest discharged after plan
Asset protection	Limited (exemptions apply)	Keep all assets
Income requirement	Must pass means test (below median)	Must have regular income
Eligibility	Income below state median	Secured debt < $1,395,875; unsecured < $465,275
Cost	$1,500–$3,500	$2,500–$6,000
Credit impact	10 years on report	7 years on report
Most common for	Credit card debt, medical bills	Mortgage catch-up, car loans

What Debts Can Be Discharged?

Debt Type	Chapter 7	Chapter 13
Credit card debt	Discharged	Partial payment, then discharged
Medical bills	Discharged	Partial payment, then discharged
Personal loans	Discharged	Partial payment, then discharged
Past-due utilities	Discharged	Included in plan
Mortgage (if surrendering home)	Discharged	Catch up over 3–5 years
Car loan (if surrendering car)	Discharged	Catch up over 3–5 years
Student loans	Generally NOT discharged	Generally NOT discharged
Child support/alimony	NOT discharged	NOT discharged
Recent tax debt (< 3 years)	NOT discharged	Included in plan
Older tax debt (> 3 years)	May be discharged	Included in plan
Court fines/restitution	NOT discharged	NOT discharged
HOA fees (current)	NOT discharged	Included in plan

Chapter 7 Means Test by State (2026 Median Income)

State	1-Person	2-Person	3-Person	4-Person
Alabama	$52,456	$62,347	$68,524	$80,917
California	$66,387	$86,756	$92,341	$103,458
Florida	$55,734	$69,812	$74,627	$86,345
Illinois	$60,123	$76,481	$84,756	$97,623
New York	$62,847	$80,935	$90,124	$105,632
Texas	$56,912	$71,345	$78,456	$91,234

If your household income is below your state’s median, you likely qualify for Chapter 7. If above, you may still qualify after deducting allowable expenses.

Bankruptcy Costs Breakdown

Cost	Chapter 7	Chapter 13
Court filing fee	$338	$313
Credit counseling course (required)	$15–$50	$15–$50
Financial management course (required)	$15–$50	$15–$50
Attorney fees	$1,000–$3,000	$2,000–$5,000
Total estimated cost	$1,368–$3,438	$2,343–$5,413

Bankruptcy Timeline

Chapter 7 Timeline

Step	When
Credit counseling course	Before filing
File petition	Day 0
Automatic stay (creditors must stop collection)	Immediately
341 Meeting of Creditors	20–40 days after filing
Objection deadline	60 days after 341 meeting
Discharge	~60–80 days after 341 meeting
Total: ~3–4 months

Chapter 13 Timeline

Step	When
Credit counseling course	Before filing
File petition + repayment plan	Day 0
Automatic stay	Immediately
Begin plan payments	30 days after filing
Confirmation hearing	20–45 days after 341 meeting
Complete repayment plan	3–5 years
Discharge	After plan completion

Impact on Your Credit Score

Timeline	Chapter 7	Chapter 13
At filing	Drop 150–250 points	Drop 130–200 points
1 year after	Score begins recovering	Score begins recovering
2 years after	Possible 600+ score	Possible 600+ score
3–4 years after	Possible 650+ with good habits	Possible 650+ / may be removed
7–10 years	Falls off credit report	Falls off at 7 years

Alternatives to Bankruptcy

Option	Best For	Impact on Credit
Debt consolidation	Multiple high-interest debts	Minimal if payments made
Debt snowball/avalanche	Self-motivated debt payoff	Positive (reducing debt)
Debt settlement/negotiation	Large unsecured debts	Moderate negative
Credit counseling (DMP)	Need structured payment plan	Minimal
Hardship programs	Temporary financial difficulty	Varies
Do nothing	Judgment-proof (no assets/income)	Stays negative

When Bankruptcy Makes Sense

Situation	Recommended Path
Debt exceeds 50% of income, no end in sight	Chapter 7 if you qualify
Behind on mortgage but want to keep home	Chapter 13
Being sued or wages garnished	Either — automatic stay stops collection
Medical bills you’ll never pay off	Chapter 7
Want to keep car but behind on payments	Chapter 13
Debt is manageable with a plan	Avoid bankruptcy — try consolidation first

Bottom Line

Bankruptcy isn’t a moral failing — it’s a legal tool designed to give people a fresh start. Chapter 7 eliminates most unsecured debt in months. Chapter 13 lets you catch up on secured debts over 3–5 years. Most people who file see their credit score recover within 2–3 years and reach 650+ within 4 years. Consult a bankruptcy attorney for a free evaluation — most offer free consultations.

For related guides, see debt relief options, how to improve your credit score, and average medical debt.

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