Chapter 7 vs Chapter 13 Bankruptcy: Which Is Right for You?
If you are considering bankruptcy the first decision is which type to file. Chapter 7 and Chapter 13 are the most common options for individuals and they work very differently.
Chapter 7: The Fresh Start
Chapter 7 discharges most unsecured debt including credit cards and medical bills within 3 to 6 months. You must pass a means test showing your income is below your state median. Most personal property is protected by exemptions.
Chapter 13: The Repayment Plan
Chapter 13 restructures your debt into a 3 to 5 year repayment plan. At the end any remaining eligible debt is discharged. Better for people with regular income who want to keep assets like a home.
Key Differences
- Chapter 7 is faster — 3 to 6 months vs 3 to 5 years
- Chapter 13 lets you catch up on mortgage arrears and keep your home
- Chapter 7 requires passing the means test
- Chapter 13 requires regular income to fund the repayment plan
Before Filing
Before choosing bankruptcy consider whether debt settlement might achieve similar results with less credit damage. National Debt Relief offers free consultations to compare options.
