Differences Between Chapter 7 and Chapter 13 Bankruptcy

If you are seriously considering bankruptcy as a financial solution to resolve your debt issues, you must know the key differences between Chapter 7 and Chapter 13 bankruptcy. As a bankruptcy lawyer like one from The Law Offices of Ronald I. Chorches can tell you, these are two of the most common types of bankruptcy that individuals and businesses file for. When you know the differences between each, you can decide whether or not filing would be right for you. Understanding the differences can be confusing, but a skilled bankruptcy lawyer who has helped many clients with their financial struggles can be of assistance.


The eligibility requirements for both Chapter 7 and Chapter 13 bankruptcy are not the same. Only individuals can file for Chapter 13, while both individuals and businesses can apply for Chapter 7. There is also a means test that individuals must pass in order to file for Chapter 7 bankruptcy. Their income must not exceed a certain amount, otherwise they will not be eligible.

Completion Length

There is a large gap in completion length between the two types of bankruptcy. Chapter 7 is the fastest form of bankruptcy because it can be completed in as little as three to four months, while individuals who file for Chapter 13 bankruptcy complete the process in three to five years.

Reorganization vs. Liquidation

Chapter 13 bankruptcy is known as reorganization, while Chapter 7 is called liquidation. Individuals who file for Chapter 13 bankruptcy must enter a repayment plan, where they agree to make affordable payments that must be made over the course of several years. People who are seeking to eliminate their unsecured debts, such as credit card debt, utility bills and medical bills, benefit from Chapter bankruptcy, where relief is more immediate.


Filing for Chapter 13 offers benefits that Chapter 7 doesn’t, such as allowing debtors to retain their property. Homeowners can keep their home and property by filing for Chapter 13 bankruptcy. Those who file for Chapter 7 risk losing their nonexempt assets, which is done as a means to pay off their credit.

These key differences are crucial to understand when you are weighing your bankruptcy options. First determine what kind of debt you have and take the necessary steps to see whether or not you are eligible. If you are still unsure or have additional questions about what each entails, seek out the help of a bankruptcy lawyer for guidance.

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