The Differences Between Chapter 7 and Chapter 13 Bankruptcy

by | Jan 11, 2019 | Legal Services

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When your monthly minimum payments are more than you can afford, bankruptcy may be an option. There are two types of bankruptcies for individuals, Chapter 7 and Chapter 13. They can both help you get out of debt but they have significant differences. An attorney from Joseph I. Wittman, Attorney at Law. can help you decide which is right for you.

Repayment Requirements

With Chapter 7, you will only be required to repay what you can afford at the time you file your bankruptcy. In some cases, the trustee will seize some of your assets and sell them to repay your creditors. Homeowners often lose their property when they file Chapter 7. Chapter 13, on the other hand, requires filers to make reasonable payment arrangements with their creditors. Many people who file chapter 13 bankruptcy are able to keep their homes.


In order to file under Chapter 7, you must pass a means test. You will not be permitted to file Chapter 7 bankruptcy if you have enough disposable income to make payments on your bills. If you cannot pass the means test, you will have to enter into a payment agreement with each of your creditors. You can extend your payments over three or five years. At the end of the agreed upon time frame, any remaining unsecured debt may be discharged.

Time Frame

With Chapter 7, the time frame between when you file and when you are relieved from your debts is typically less than six months. When you file chapter 13 bankruptcy, either because you have too much income and assets or because you want to keep your home and car, your case will not be discharged until you make your last payment.

Effect on Credit

Chapter 7 bankruptcies remain on the filer’s credit report for 10 years after the debts are discharged. Because a portion of the filer’s debts are repaid in Chapter 13, the notation only remains on a credit report for seven years after the filing date. The Federal Housing Administration will guarantee a new mortgage after a Chapter 7 bankruptcy has been discharged for two years or after on-time payments have been made on a Chapter 13 bankruptcy for at least one year.

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