Chapter 7 and Chapter 13: Eligibility, Process, and Outcome

The two consumer chapters answer different questions. Chapter 7 asks what the debtor owns: a trustee collects any property that is not exempt, sells it, distributes the proceeds, and the case ends. For an individual, the discharge normally arrives months rather than years after filing. Chapter 13 asks what the debtor earns: the debtor proposes a plan that pays creditors from future income over three or five years, and the discharge comes only when the plan is finished. Because the questions differ, so does the eligibility screen, the role of the trustee, and what a debtor can accomplish.

1.Two different bargains

Both chapters live in the same federal statute, title 11 of the United States Code, and both are administered by federal bankruptcy courts. That federal frame is fixed. What varies enormously from state to state is the exemption law layered underneath it, which decides how much property a Chapter 7 trustee actually finds worth selling. That interaction is covered separately in the entry on exempt property, and it is often the single fact that decides which chapter makes sense.

In Chapter 7 the bargain is property for relief. The estate takes everything the debtor owns at filing except what an exemption protects. In practice, a large share of consumer Chapter 7 cases are reported as no-asset cases, meaning the trustee finds nothing worth liquidating after exemptions and costs. The U.S. Trustee Program supervises the panel trustees who make that call in most districts.

In Chapter 13 the bargain is income for control. The debtor keeps the property and instead commits disposable income to a plan. A trustee collects the payments and distributes them. Because the debtor is paying rather than surrendering, Chapter 13 can do things liquidation cannot: hold off a foreclosure while arrears are made up, spread a nondischargeable tax debt over the plan term, or protect a co-signer on a consumer debt.

2.Who may file which chapter

Chapter 7 for an individual with primarily consumer debts is screened by the means test in section 707(b). Income for the six months before filing is annualized and compared with the median family income for the debtor's state and household size, published by the U.S. Trustee Program. Above the median, a second calculation applies standardized deductions to test whether disposable income is high enough to raise a presumption of abuse. The mechanics are set out in the entry on the means test.

Chapter 13 has a different gate. Only an individual with regular income may file, and only if unsecured and secured debts fall below the ceilings in section 109(e). Those ceilings are adjusted periodically and should be read from the current statutory text rather than from memory. A temporary combined limit enacted in 2022 lapsed in mid-2024, and the separate secured and unsecured caps returned; as of mid-2026 that is the operating rule.

Both chapters require a pre-filing credit counseling briefing and a post-filing financial management course from approved providers, described in the entry on counseling and debtor education.

3.How each case runs

1. Petition and schedules. Both chapters begin with a petition, schedules of assets, debts, income and expenses, and a statement of financial affairs. Filing triggers the automatic stay immediately.
2. Trustee appointment. A Chapter 7 panel trustee looks for assets. A Chapter 13 standing trustee reviews the plan and begins receiving payments, which start before confirmation.
3. Meeting of creditors. The debtor is examined under oath by the trustee, and creditors may attend and ask questions. The same meeting exists in both chapters.
4. Plan or liquidation. Chapter 13 moves to a confirmation hearing on the proposed plan. Chapter 7 moves to sale or abandonment of estate property.
5. Discharge. In Chapter 7 it follows the deadline for objections. In Chapter 13 it waits for the last plan payment, which may be years later.

The court forms, national procedures, and general explanations are maintained on the federal judiciary's bankruptcy pages, and local rules add district-specific requirements on top.

4.What a plan can do that liquidation cannot

Caution: Lien stripping in Chapter 13 depends on the junior lien being wholly unsecured — no equity at all supporting it — and on district practice about how and when the determination is made. A lien that is even slightly in the money is treated differently.

5.Conversion, dismissal, and second filings

The choice made at filing is not final. A Chapter 13 debtor generally has a right to convert to Chapter 7, and a Chapter 7 case can be converted to Chapter 13 if the debtor qualifies. A Chapter 13 debtor also has a right to dismiss a case that was not converted from another chapter. Those rights matter because circumstances change: a job loss can make a plan unaffordable, and an unexpected inheritance can make liquidation unattractive.

Repeat filings carry consequences in both directions. The stay is limited for debtors with recent dismissed cases, and the discharge itself is subject to waiting periods measured from the filing date of the earlier case. Those periods differ by chapter pairing, and they are among the first things a competent review checks.

6.Questions this raises

Does Chapter 7 mean losing the house and the car?

Not automatically. A trustee sells only property that is not exempt and that has enough equity to produce a return after liens and costs of sale. Secured collateral with little or no equity is usually abandoned. What the debtor keeps depends on the exemption scheme of the applicable state, which varies widely, and on whether payments on the loan continue.

Why would anyone choose the longer chapter?

Because it does things liquidation cannot. A homeowner in default can cure arrears over years while keeping the property. A debtor with non-exempt assets can retain them by paying creditors their value. Someone whose income defeats the means test may have no Chapter 7 option. And certain obligations, including some tax debts, are easier to manage inside a structured plan than outside one.

What happens if plan payments stop partway through?

The trustee will usually move to dismiss or convert. A debtor facing a temporary problem may seek to modify the plan, suspend payments, or convert to Chapter 7. A dismissal leaves creditors free to resume collection, and interest and fees that the plan held in abeyance may reappear. Nothing about a partially completed plan produces a partial discharge.

Do both chapters wipe out the same debts?

No, though the overlap is large. The discharge available on completing a repayment plan is somewhat broader for certain divorce-related property obligations, while support itself survives under both chapters. Nearly every category that survives a Chapter 7 discharge survives a Chapter 13 discharge as well. The differences are narrow and technical, they have shifted with amendments over the years, and they should be checked against the current text of the statute rather than assumed from a summary.

7.Working through the choice

A workable sequence is to start with property, not with income. List what is owned, apply the exemption scheme that governs, and see what would be exposed in a liquidation. Then run the income test to see whether Chapter 7 is available at all. Then ask what needs to be fixed rather than discharged — a mortgage default, a vehicle arrearage, a tax balance — because those goals point toward a plan.

Finally, confirm the timing questions: any prior case within the last several years, any transfer of property in the recent past, and any debt likely to be challenged as nondischargeable. Free explanatory material for consumers is published by the Consumer Financial Protection Bureau, and district-specific requirements come from the local court. Neither chapter is inherently better; they solve different problems.