Chapter 7 vs Chapter 13: The Means Test, What You Keep and the Credit Timeline
Chapter 7 is fast and wipes out most unsecured debt; Chapter 13 keeps your property through a repayment plan. The means test, your state's exemptions and what you're behind on decide which one fits.
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📐 Figures verified Sep 28, 2026 against the Judicial Conference's adjusted Bankruptcy Code dollar amounts (Federal Register, Feb. 4, 2025; they apply to cases filed on or after April 1, 2025 and next adjust on April 1, 2028), the federal courts' Chapter 7 and Chapter 13 guides and fee schedule, the U.S. Trustee Program's means-testing data, IRS Publication 4681, Federal Student Aid and the CFPB. How we check numbers →
Chapter 7 wipes out most unsecured debt in about four months, but only if you pass the means test, and a trustee can sell property your exemptions don't cover. Chapter 13 keeps your property in exchange for a three- to five-year repayment plan, and it can catch up a mortgage or car loan. Chapter 7 stays on credit reports up to 10 years; Chapter 13 usually 7.
Numbers That Matter
| Figure | Amount | Source | Verified |
|---|---|---|---|
| Means test: 60 months of disposable income | Under $10,275 passes; $17,150 or more fails; in between, it depends on your unsecured debt | Federal Register, 11 U.S.C. 707(b) | Sep 28, 2026 |
| Chapter 13 debt limits | $526,700 unsecured and $1,580,125 secured | Federal Register, 11 U.S.C. 109(e) | Sep 28, 2026 |
| Federal homestead exemption | $31,575 of equity, doubled in a joint case | Federal Register, 11 U.S.C. 522(d) | Sep 28, 2026 |
| Federal vehicle exemption | $5,025 of equity | Federal Register, 11 U.S.C. 522(d) | Sep 28, 2026 |
| Federal wildcard exemption | $1,675 plus up to $15,800 of unused homestead | Federal Register, 11 U.S.C. 522(d) | Sep 28, 2026 |
| IRA exemption cap | $1,711,975 (401(k) plans are protected without a cap) | Federal Register, 11 U.S.C. 522(n) | Sep 28, 2026 |
| Debt discharged in bankruptcy | Not taxable | IRS Publication 4681 | Sep 28, 2026 |
| Bankruptcy on credit reports | Up to 10 years | CFPB | Sep 28, 2026 |
Chapter 7 vs Chapter 13 at a Glance
| Chapter 7 | Chapter 13 | |
|---|---|---|
| What it does | A trustee sells non-exempt property; most unsecured debt is discharged | You repay part of your debt through a court-approved plan; the rest is discharged at the end |
| Who qualifies | Income below your state's median, or you pass the rest of the means test | Regular income and debts under $526,700 unsecured and $1,580,125 secured |
| How long | Discharge usually about four months after filing | 3 years (income below median) or 5 years (above) |
| Your property | Keep what exemptions cover; the rest can be sold | Keep it all, but creditors must get at least what a Chapter 7 sale would pay |
| Behind on a house or car | Can't catch up through the case; surrender, or keep paying and stay current | Catch up the missed payments over the plan |
| Cosigners | Still on the hook | Protected on consumer debts while the plan runs |
| Filing fee | $338 | $313 |
| Credit reports | Up to 10 years | Usually 7 years |
How the Means Test Works
Step one compares your household's average income over the six full months before filing, annualized, with your state's median for a household your size; the U.S. Trustee Program publishes the figures. Below the median, you qualify for Chapter 7. Above it, step two subtracts allowed expenses, many set by IRS collection standards, to find monthly disposable income, then multiplies it by 60. Under $10,275 (about $171.25 a month) you pass; $17,150 or more (about $285.83 a month) you fail; in between, you fail only if the 60-month total would repay at least 25% of your non-priority unsecured debt. Failing usually points to Chapter 13.
What You Keep: Exemptions
Exemptions protect a dollar amount of equity, what you'd net after paying off any loan against the property. Some states let you choose the federal list; many require their own, which can be far more or less generous, especially for homes. You generally use the exemptions of the state where you lived for the two years before filing. Federal amounts for cases filed from April 1, 2025: $31,575 of home equity, $5,025 of vehicle equity, household goods up to $800 an item and $16,850 in total, a $1,675 wildcard plus up to $15,800 of unused homestead, and tools of your trade up to $3,175, all doubled for married couples filing jointly. Retirement money is well protected: 401(k) and other ERISA plans without a cap, and IRAs up to $1,711,975.
Debts That Survive Either Chapter
- Child support and alimony.
- Most recent income taxes; older ones can sometimes be discharged.
- Student loans, unless you prove undue hardship in a separate proceeding; federal borrowers now use a streamlined attestation process with the Justice Department.
- Criminal fines and restitution, and debts from fraud, including luxury purchases over $900 or cash advances over $1,250 taken shortly before filing.
Chapter 13 can still help here: it spreads priority debts such as recent taxes over the plan and stops interest and collection while you pay.
The Credit Timeline and Refiling Limits
A Chapter 7 can stay on your credit reports for up to 10 years from filing; the bureaus usually remove a Chapter 13 after 7. The accounts included show as discharged, and scores often start recovering within a year or two of on-time payments on whatever credit you keep or rebuild. Before filing you need a credit counseling course from a U.S. Trustee-approved agency within 180 days, and before discharge a debtor education course.
Timing limits on a second discharge: 8 years between Chapter 7 filings; 4 years from a Chapter 7 filing to a Chapter 13 discharge; 2 years between Chapter 13 filings; and 6 years from a Chapter 13 to a Chapter 7, unless the Chapter 13 plan paid unsecured creditors in full, or at least 70% in good faith and with best effort.
Worked Examples: Two Households
- Alex files Chapter 7. Single, earning below the state median, with $42,000 of card and medical debt. His car has $4,000 of equity (under the $5,025 vehicle exemption), $1,200 in checking fits in the $1,675 wildcard, and his $18,000 401(k) is fully protected. In a state that allows the federal list, he keeps everything, pays the $338 filing fee plus a lawyer, and gets a discharge in about four months. The $42,000 discharged isn't taxable.
- The Riveras choose Chapter 13. Married, earning above the median, with $90,000 of home equity. The joint federal homestead protects $63,150, leaving $26,850 a Chapter 7 trustee could reach by selling the house. In Chapter 13 they keep it, but unsecured creditors must get at least that $26,850: about $447.50 a month over 60 months, or about $497.22 once a trustee fee of up to 10% is added. Their disposable income can push the payment higher.
Both use the federal exemptions and leave out costs of sale and attorney fees; your state's exemptions and your lawyer's fees change the numbers. Alex and the Riveras are illustrations.
Decision Rules
If this, then that
- If your income is below your state's median and your equity fits the exemptions → Chapter 7 is usually faster and cheaper.
- If you're behind on a mortgage or car you want to keep → Chapter 13 lets you catch up over the plan.
- If you have equity above the exemptions → Chapter 13 protects it; Chapter 7 may not.
- If a family member cosigned your debts → Chapter 13 shields them while the plan runs.
- If most of your debt is recent taxes or support → neither chapter erases it; Chapter 13 can organize the payments.
- If you filed before → check the refiling windows before choosing a chapter.
Mistakes to avoid
- Moving property or paying back family members right before filing.
- Running up cards or taking cash advances you plan to discharge.
- Draining a protected 401(k) to pay debts bankruptcy could erase.
- Assuming the federal exemptions apply in your state.
- Skipping the counseling or debtor education courses.
Related: what happens if you file bankruptcy walks through the process; the debt relief decision tree shows when bankruptcy beats the other paths; debt settlement after fees and taxes covers the main alternative; and defaulted student loans in 2026 covers loans bankruptcy rarely erases.