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Chapter 7 and. Chapter 13: Which Bankruptcy Choice is Best for You?

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Chapter 7 or. Chapter 13: Which Bankruptcy Choice is Best for You?

Chapter 7 bankruptcy is faster and less expensive as compared to Chapter 13 bankruptcy, but it’s not the ideal choice for everyone.

by Sean Pyles Senior Writer | Personal financial and credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet’s “Smart Money” podcast. On “Smart Money” Sean talks with Nerds across NerdWallet’s NerdWallet Content team to answer listeners’ personal finance questions. With a focus on thoughtful and practical advice on money, Sean provides real-world guidance that will help consumers improve their financial lives. Beyond answering listeners’ money concerns on “Smart Money,” Sean also interviews guests outside of NerdWallet and also creates special segments on topics such as the racial gap in wealth, how to start investing and the history of college loans.

Before Sean took over podcasting at NerdWallet He also covered issues that dealt with consumer debt. His work has appeared throughout the media including USA Today, The New York Times and other publications. When Sean isn’t writing about personal finance, Sean can be found working in his garden, going for runs and walking his dog for long walks. He is based in Ocean Shores, Washington.

Dec 15, 2021

Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in positions such as copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in mass communication and journalism at The University of Iowa.

A majority of the products featured here are from our partners who pay us. This impacts the types of products we review and where and how the product is featured on a page. However, this does not influence our opinions. Our opinions are entirely our own. Here is a list of and .

Bankruptcy is one of the most efficient and fastest ways to get . Many people who take this path will choose to file to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Which is best depends on the person’s assets and financial objectives.

To help you comprehend the distinction in Chapter 7 and Chapter 13 bankruptcy, here’s a breakdown of each and the people are the best for. Whichever you decide to go with, it’s best if:

Your monthly consumer debt payments exceed 50 percent of your monthly take-home earnings.

You’re in the middle of lawsuits from creditors.

You see no way to pay off your debt within five years.

What’s what’s the distinction of Chapter 7 and Chapter 13 bankruptcy?

The main differences of vs. bankruptcy is those of eligibility criteria, the method by which debts are resolved and the duration of time.

Check out this table to gain an overview of:

Chapter 7

Chapter 13

Form of bankruptcy: Liquidation.

Form of bankruptcy: Reorganization.


You must pass the means test, which evaluates your earnings, expenses and the size of your family.

It is not possible to have had a prior Chapter 7 discharge in the or a Chapter 13 in the past six years.

Cannot have filed bankruptcy papers (Chapter 7, 13) in the previous 180 days, and it was rejected for a variety of reasons, such as failing to attend court or follow court orders.


Unsecured loans cannot exceed $419,275 and secured debt can’t exceed $1,257,850.

You must earn a regular income and have current tax returns.

It is not possible to have had any Chapter 13 filing in the past two years or Chapter 7 within the last four years.

Cannot have filed bankruptcy (7 or 13) in the previous 180 days that was dismissed due to certain reasons, like failure to appear or not complying with court orders.

How long it takes to get a discharged: Usually under six months.

How long does it take to get a discharged: Usually three to five years, contingent on the repayment plan.

Credit report marks It remains the credit score after the date of the filing.

The credit report’s mark: Remains in your credit file for the time period from the date of filing.


The fastest routes to resolve overwhelming debt.

The filing of a bankruptcy petition stops collection efforts and legal action from creditors.


It can help you settle your debts while retaining certain assets, or avoiding getting caught up on secured debts, like an automobile loan or mortgage.

A bankruptcy petition can stop collection efforts and legal action from creditors.


Although it is rare, trustees can sell nonexempt property.

Generally for unsecured debt; does not protect against repossession or foreclosure.


The length and the cost that comes with the payment plan can be difficult and a lot of filers find it difficult.

Which one is better? 7 or Chapter 7 or Chapter 13?

Which form of is best for you will depend on your situation financially and objectives.

For determining whether Chapter 7 or Chapter 13 bankruptcy is right for you . You’ll need to be sure your problem debts can be dealt with by bankruptcy and you’re in a position make the most of the new beginning bankruptcy provides.

Most consumers opt for Chapter 7 bankruptcy, which is quicker and cheaper as compared to Chapter 13. Most filers qualify for Chapter 7 after taking the test, which looks at the family’s income, expenditures and size to determine the possibility of being eligible. Chapter 7 bankruptcy discharges, or erases, eligible debts like credit card debts medical debt, personal loans. However, other debts, such as student loans and taxes, typically aren’t considered eligible. Additionally, Chapter 7 doesn’t offer a way to catch up on secured loan payment, such as a mortgage or auto loan but it does not secure those assets from foreclosure or repossession.

In certain situations bankruptcy trustees — an administrator who works with bankruptcy courts to represent the estate of the debtor can sell nonexempt items, meaning items that aren’t protected during bankruptcy. Nonexempt items are defined according to the laws of the state.

Chapter 13 bankruptcy may be better for those who don’t meet the requirements for Chapter 7 bankruptcy. Chapter 7 filing, for instance or if their income is too high. And some who qualify for Chapter 7 may still choose to apply for Chapter 13 because they want to protect certain assets or get caught up on their mortgage payments. However, Chapter 13 repayment plans are challenging: All disposable income after certain allowances must be geared towards repaying debt over a period of three to five years.

Check out the complete picture of your debt

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About the author: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has appeared in The New York Times, USA Today and elsewhere.

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