Chapter 7 bankruptcy vs. Chapter 13 bankruptcy: What are the differences?

When it comes to increasing your levels of stress, there are few things that do it more efficiently than financial troubles. Unfortunately, these types of issues are relatively common across the nation. While it may not be a perfect solution, declaring bankruptcy can provide people with relief from their debts and the stresses that come with them.

While no two situations are exactly the same, people often find themselves in similar circumstances. Once your exact situation has been taken into account, you may find that one form of bankruptcy is more beneficial than another. Each has its own pros and cons.

Chapter 7 vs. 13: Differences

Debt elimination vs. repayment

One of the single biggest differences between chapter 7 and chapter 13 bankruptcies is how the debtor’s debt is actually handled. With chapter 7, a large portion (if not all) of the debt is eliminated and the debtor is no longer responsible for repayment. However, some types of loans cannot be eliminated by chapter 7 bankruptcies, e.g. student loans, some tax debts.

With chapter 13 bankruptcy, the debtor is enrolled into a repayment plan. The goal of this plan is to allow the debtor the opportunity to pay back the funds they owe over the course of three to five years.


To be eligible for chapter 7 bankruptcy, the debtor must be able to pass the means test. The means test essentially just determines whether or not the debtor’s average income is more or less than the median income of their home state. If the debtor is unable to qualify for chapter 7, they may still qualify for chapter 13 bankruptcy.


While chapter 7 bankruptcy will eliminate many if not all debts, many of the debtor’s assets will be repossessed and liquidated to cover the cost of debts. This could include homes, vehicles, furniture, etc.

However, chapter 13 bankruptcy will often stop any foreclosures on property or repossessions on vehicles. This can often lead to the debtor being able to keep more of their nonexempt property and belongings instead of having them liquidated.

These are just a few of the primary differences between chapter 7 and chapter 13 bankruptcy. Because every situation is unique, the details of an individual’s finances can become complicated very quickly. As such, it is recommended that you seek out the services of a knowledgeable legal professional if you are considering declaring bankruptcy of any kind. They will be able to use their expertise to help you determine the most beneficial course of action for your situation and they will work with you to achieve the best possible outcome.

Attorney Brad Hawley

Attorney Brad HawleyAttorney Brad Hawley possesses years of practical experience focused on bankruptcy, civil and criminal defense. He has prosecuted and defended clients in state court, and is a former enlisted member of the United States Army. Brad is driven by his desire to help people that have been hurt by the legal system, and is dedicated to fixing injustices he sees around him. [ Attorney Bio ]

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