| Quick Answer: Chapter 7 bankruptcy wipes out most unsecured debt in about four months but can sell property your state does not protect. Chapter 13 lets you keep property through a three- to five-year repayment plan. U.S. Courts counted 382,161 Chapter 7 and 215,490 Chapter 13 filings in the year to June 30, 2026, and only about 45% of Chapter 13 plans closed in 2025 were completed. |
Bankruptcy filings are still climbing in 2026. Total filings rose 12.2% to 608,511 in the 12 months ending June 30, 2026, according to the Administrative Office of the U.S. Courts. Epiq AACER counted 282,413 individual Chapter 7 filings from January through September 2026, up 13%, and 160,817 individual Chapter 13 filings, up 8%. The two chapters solve different problems, and picking the wrong one is expensive.
| Key TakeawaysChapter 7 made up about 63% of filings in the year to June 30, 2026 and grew faster (14.7%) than Chapter 13 (7.6%).If your income is below your state median, you generally pass the Chapter 7 means test; medians run from $53,978 to $178,524 depending on state and household size.Chapter 7 costs $338 to file plus typical attorney fees of $1,500 to $2,500; Chapter 13 costs $313 plus about $2,500 to $3,500, often paid through the plan.Of 183,939 Chapter 13 cases closed in 2025, 44.6% ended with a completed plan, and completion ranged from 6.8% to 69.5% by court district.Congress passed a single $2.75 million Chapter 13 debt limit in 2026; it applies only to cases filed after the President signs it. |
| Methodology: how we compared the two chaptersSelection: the seven differences that most often decide which chapter a household files, based on federal law and current court data. Data sources: U.S. Courts Table F-2 for the year ending June 30, 2026; U.S. Courts BAPCPA Table 6 for Chapter 13 cases closed in calendar 2025; U.S. Trustee Program means-test data; federal exemption amounts effective April 1, 2025; Epiq AACER monthly data. Date collected: October 28 to 30, 2026. Worked example profile: a homeowner with $40,000 of unsecured debt and $9,000 of missed mortgage payments. Figures are illustrations, not legal advice. |
What changed for bankruptcy filers in 2026?
The biggest change is still pending. Congress finished passing the Bankruptcy Threshold Adjustment Act (H.R. 7730), enrolled for the President on October 9, 2026; it replaces Chapter 13’s separate caps with one $2.75 million limit on combined secured and unsecured debt. The new limit applies only to cases filed on or after enactment. Until then, filers must owe less than $526,700 in unsecured debt and $1,580,125 in secured debt. Means-test income tables are also updated periodically, so check the U.S. Trustee Program table in effect on your filing date.
How do Chapter 7 and Chapter 13 compare side by side?
| Difference | Chapter 7 (liquidation) | Chapter 13 (repayment plan) |
|---|---|---|
| 1. Who qualifies | Must pass the means test | Regular income; debts under the Chapter 13 limits |
| 2. Your property | Trustee can sell nonexempt property | You keep property and pay its value through the plan |
| 3. Timeline | About 4 months | 3 years (below median) or 5 years (above median) |
| 4. Cost | $338 filing fee; attorney fees paid up front | $313 filing fee; attorney fees often paid through the plan |
| 5. Debts wiped out | Most unsecured debt, quickly | Remaining eligible debt after the plan, plus a slightly broader discharge |
| 6. Home and car | Does not cure missed mortgage payments | Can catch up missed payments over the plan |
| 7. Credit and odds | Reported 10 years; most cases discharge | Reported 7 years; 44.6% of plans completed in 2025 |
Sources: U.S. Courts, U.S. Courts BAPCPA Table 6, U.S. Trustee Program, Upsolve, Experian.
1. Who qualifies for Chapter 7 versus Chapter 13?
Verdict: Chapter 7 is gated by income; Chapter 13 is gated by debt size and steady income.
The means test compares your average income over the six months before filing with your state’s median for your household size. For cases filed on or after April 1, 2026, single-earner medians range from $53,978 in Mississippi to $88,585 in Washington, and four-person medians from $93,672 in West Virginia to $178,524 in Massachusetts. Below the median, you generally qualify for Chapter 7. Above it, a second calculation subtracts allowed expenses, and if disposable income is too high, the U.S. Trustee or creditors can seek dismissal. Chapter 13 needs regular income and debts under the current limits.
Real example: a single earner in Texas passes the first step at $66,837 or less, while the California threshold is $79,253. A Massachusetts family of four has a median 3.3 times higher than a single Mississippi earner.
Fits Chapter 7: below-median earners with mostly unsecured debt. Skip it if your income is well above median and you have spare cash flow each month. Not sure you need either? Start with 10 Signs You Need Professional Debt Help Now.
2. What happens to your property in each chapter?
Verdict: Chapter 7 protects what your exemptions cover and nothing more; Chapter 13 lets you keep everything if the plan pays creditors its value.
In Chapter 7 a trustee can sell nonexempt assets to pay creditors. Exemptions set what you keep. The federal list protects $31,575 of home equity and $5,025 of vehicle equity for cases filed from April 1, 2025, though many states require their own list. Florida and Texas offer unlimited homestead exemptions, but federal law caps the exemption at $214,000 for homes bought less than 40 months before filing. In Chapter 13 you keep property, but the plan must pay unsecured creditors at least what they would have received in a Chapter 7 liquidation.
Real example (FinanceDevil math): a homeowner using federal exemptions with $60,000 of equity has $28,425 exposed in Chapter 7. In Chapter 13 they keep the house, but the plan must pay unsecured creditors at least $28,425 over its life.
Fits Chapter 7: renters and owners whose equity fits inside their exemptions. Skip it if you hold valuable nonexempt property you want to keep.
3. How long does each bankruptcy take?
Verdict: Chapter 7 is a sprint; Chapter 13 is a three- to five-year commitment.
Chapter 7 cases usually take about four months, while Chapter 13 cases stay open for three to five years. The U.S. Trustee Program notes that your income level sets the plan length, usually three years below the state median and five years above it. Through all of it you report income changes and get court approval for major new debt.
Real example: a Florida single filer earning $60,000, below the $69,876 median, would generally qualify for a three-year Chapter 13 plan if they chose that chapter, or Chapter 7 if their assets are protected.
Fits Chapter 13: people who need time, not just a discharge. Skip it if your income is unstable; a missed run of payments can end the case with no discharge.
4. How much does each chapter cost in 2026?
Verdict: Chapter 7 costs less in total but needs cash up front; Chapter 13 costs more but spreads the bill.
As of 2026, the court filing fee is $338 for Chapter 7 and $313 for Chapter 13, and only Chapter 7 offers a fee waiver. Nolo research cited by ConsumerAffairs puts typical attorney fees at about $1,500 to $2,500 for Chapter 7 and $2,500 to $3,500 for Chapter 13, with Chapter 13 fees usually paid through the plan. Both chapters require a credit counseling course before filing and a debtor education course before discharge.
Real example: a Chapter 7 filer paying $338 plus a $2,000 attorney fee needs about $2,338 before filing. A Chapter 13 filer can start with the $313 fee, payable in installments, and fold most legal fees into monthly payments.
Fits Chapter 13: people who cannot raise a lump sum. Skip it if a one-time $2,000 to $3,000 outlay is manageable and Chapter 7 solves your problem.
5. Which debts are wiped out in each chapter?
Verdict: Both erase credit cards and medical bills, but Chapter 13 discharges a slightly wider set of debts at the end.
Chapter 7 discharges most unsecured debts, including credit cards, medical bills and personal loans, in months. Chapter 13 pays what the plan requires, then discharges eligible balances that remain, including some debts Chapter 7 cannot touch, such as certain non-support obligations from a divorce settlement. Neither chapter usually erases recent taxes, child support, alimony or most student loans. With credit card balances at $1.26 trillion in the second quarter of 2026, according to the New York Fed, unsecured card debt is the most common reason people file.
Real example: someone with $40,000 in card debt and no assets gets a full Chapter 7 discharge in roughly four months. If you can still pay something, compare payoff plans first in 6 Signs the Debt Avalanche Beats the Snowball for You.
Fits Chapter 7: mostly dischargeable unsecured debt. Skip it if the debts that hurt most, such as tax or support arrears, survive Chapter 7 anyway.
6. Can you keep your home and car in Chapter 7 or Chapter 13?
Verdict: If you are behind on the mortgage and want to stay, Chapter 13 is usually the tool.
Both chapters trigger an automatic stay that pauses collection and foreclosure. In Chapter 7 the pause is temporary, and you must stay current to keep a mortgaged home or car. Chapter 13 lets you repay missed mortgage payments over the life of the plan, and its codebtor stay can protect a cosigner on consumer debts.
Real example: a homeowner $9,000 behind on the mortgage can spread that catch-up across a 60-month plan, about $150 a month, while paying the regular mortgage. A HELOC is treated like a mortgage here; we cover how second liens work in 6 Differences Between a HELOC and a Home Equity Loan.
Fits Chapter 13: homeowners in arrears who can afford the regular payment again. Skip it if the home is unaffordable long term; a plan only delays the loss.
7. How do credit impact and success rates differ?
Verdict: Chapter 13 leaves your credit report sooner, but fewer than half of plans reach the finish line.
Experian removes a Chapter 7 filing 10 years after the filing date and a Chapter 13 filing after seven years. The bigger risk is not finishing. Of 183,939 Chapter 13 cases closed in 2025, 82,099 ended with a completed plan and 101,709 were dismissed, about half of those for failure to make plan payments.
Real example (FinanceDevil math from the same table): completion was 69.5% in the Eastern District of Kentucky, 58.0% in Minnesota, 48.2% in the Southern District of Florida, 29.2% in the Northern District of Georgia and 6.8% in the Eastern District of New York.
Fits Chapter 13: filers with stable income and a specific asset to protect. Skip it if your budget has no slack; a dismissed case can leave you with fees paid and debts intact.
| State callout: where you file changes the oddsCompletion rates vary more by court district than by chapter rules. Local trustee practices, attorney fee structures and how often cases are refiled all play a part, so ask a local attorney for the completion rate in your district before choosing Chapter 13. |
What does each chapter cost in a real example?
Our example homeowner owes $40,000 in unsecured debt and is $9,000 behind on the mortgage. Calculations were verified in code; the 8% trustee fee is an assumption within the legal cap of 10%, and actual fees vary by district.
| Line item | Chapter 7 | Chapter 13 (60-month plan) |
|---|---|---|
| Filing fee | $338 | $313 |
| Attorney fee | $2,000 up front | $3,000 paid through the plan |
| Plan payments | None | $400 x 60 = $24,000 |
| Trustee fee (assumed 8%) | None | $1,920 |
| Mortgage arrears cured | $0 (stays in default) | $9,000 |
| Paid to unsecured creditors | $0 (debt discharged) | $10,080 (25.2% of $40,000) |
| Home outcome | Foreclosure risk continues | Keeps home if plan completes |
Filing fees from Upsolve; attorney fee midpoints from ConsumerAffairs citing Nolo. Illustrative only.
| FinanceDevil insightIn this example, Chapter 13 costs the homeowner about $11,000 more than Chapter 7 in payments to creditors and fees. That premium buys the house. If keeping the house is not the goal, Chapter 7 usually wins on cost; if it is, the real question is whether the household can make 60 straight payments in a system where 55% of closed plans were dismissed in 2025. |
| Expert view“The continued increase in bankruptcy filings reflects the strain of higher borrowing costs.”Michael Hunter, vice president of Epiq AACER, in Epiq’s October 2026 filing data release |
ABI and Epiq data for September 2026 showed individual Chapter 7 filings up 9% and Chapter 13 up 4% from a year earlier, so the gap between the chapters is still widening.
Frequently asked questions about Chapter 7 vs Chapter 13
What is the main difference between Chapter 7 and Chapter 13 bankruptcy?
Chapter 7 is liquidation: a trustee can sell nonexempt property, and most unsecured debt is discharged in about four months. Chapter 13 is reorganization: you keep your property and repay part of your debt through a court-approved plan lasting three to five years, then the remaining eligible balance is discharged.
Which is better, Chapter 7 or Chapter 13?
Neither is better in general. Chapter 7 is usually better for below-median earners with few assets, because it is faster and cheaper. Chapter 13 is usually better for people with steady income who want to keep a home, catch up missed mortgage payments or protect nonexempt property. A local bankruptcy attorney can compare both for your situation.
How do I know if I qualify for Chapter 7 in 2026?
Compare your average monthly income over the six months before filing with your state median for your household size. For cases filed on or after April 1, 2026, single-earner medians range from $53,978 in Mississippi to $88,585 in Washington. Below the median, you generally qualify; above it, a detailed expense calculation decides.
What is the Chapter 13 debt limit in 2026?
Under current law, you must owe less than $526,700 in unsecured debt and $1,580,125 in secured debt. Congress passed H.R. 7730 in 2026 to replace both caps with a single $2.75 million limit. It applies only to cases filed on or after the day it becomes law, so confirm its status before filing.
How much does it cost to file bankruptcy in 2026?
The court filing fee is $338 for Chapter 7 and $313 for Chapter 13. Attorney fees typically run about $1,500 to $2,500 for Chapter 7 and $2,500 to $3,500 for Chapter 13, according to Nolo research. Chapter 7 filers can request a fee waiver; Chapter 13 fees are often paid through the plan.
Can I keep my house if I file Chapter 7?
Often, yes, if your home equity is covered by your exemption and you stay current on the mortgage. The federal homestead exemption protects $31,575, and some states, including Florida and Texas, protect far more. If you are behind on payments, Chapter 7 does not cure the default, so Chapter 13 is usually safer.
How long does bankruptcy stay on my credit report?
Chapter 7 stays on your credit report for 10 years from the filing date and Chapter 13 for seven years, according to Experian. The clock starts when you file, not when the case ends. Scores usually start recovering sooner if you rebuild with on-time payments and low balances.
What percentage of Chapter 13 plans are completed?
In 2025, 82,099 of 183,939 closed Chapter 13 cases, or 44.6%, ended with a completed plan, according to U.S. Courts data. The rest were dismissed, about half for missed plan payments. Completion varied widely by district, from 6.8% in the Eastern District of New York to 69.5% in the Eastern District of Kentucky.
Can I switch from Chapter 13 to Chapter 7?
Yes. You can usually convert a Chapter 13 case to Chapter 7 if you qualify, for example after losing income and falling below the means-test threshold. The credit reporting clock still runs from your original filing date. Conversion avoids starting over, but property protected in Chapter 13 may then face a trustee sale.
Are bankruptcy filings rising in 2026?
Yes. Filings rose 12.2% to 608,511 in the 12 months ending June 30, 2026, according to U.S. Courts. Epiq AACER data show individual Chapter 7 filings up 13% and Chapter 13 up 8% for January through September 2026, reflecting higher borrowing costs and household debt pressure.
Do I need a lawyer to file Chapter 7 or Chapter 13?
The law does not require one, but outcomes improve with counsel, especially in Chapter 13, where plans must be confirmed and managed for years. Many attorneys offer free consultations, and Chapter 13 fees can be paid through the plan. Nonprofit credit counseling can also help you decide whether bankruptcy is necessary.
| DisclaimerThis article is general education, not legal or financial advice. Bankruptcy law, exemptions, means-test figures and debt limits change and vary by state and court district; figures are as of the dates shown. Consult a licensed bankruptcy attorney in your state before filing. |
Sources
- U.S. Courts, “Bankruptcies Rise 12.2 Percent” (July 28, 2026)
- U.S. Courts, BAPCPA Table 6: Chapter 13 cases terminated, 12 months ending December 31, 2025
- Epiq AACER, “Small Business Subchapter V Elections Increase 46% Compared to Last Year” (October 8, 2026)
- American Bankruptcy Institute, Bankruptcy Statistics, September 2026 highlights
- U.S. Department of Justice, U.S. Trustee Program, Means Testing (updated June 30, 2026)
- LegalClarity, “What Is the Income Limit for Chapter 7 Bankruptcy?” (April 2026 medians)
- LegalClarity, “State Median Income Limits and the Chapter 7 Means Test” (April 2026 medians)
- National Consumer Law Center, “April 1 Increase of Federal Bankruptcy Exemptions” (2025)
- Nolo, “The Homestead Exemption in Bankruptcy” (2025 to 2028 amounts)
- Upsolve, “How Much Does It Cost To File Bankruptcy in 2026?”
- ConsumerAffairs, “How Much Does It Cost to File for Bankruptcy? 2026”
- Experian, “How Long Does a Bankruptcy Stay on Your Credit Report?”
- GovInfo, H.R. 7730 Bankruptcy Threshold Adjustment Act, enrolled bill (October 9, 2026)
- Bloomberg Law, “Higher Debt Caps to Boost Small Business, Personal Bankruptcies” (September 2026)
- Falcon Rappaport & Berkman, “Congress Approves Permanent Expansion of Subchapter V Debt Limit” (September 2026)
- California Lawyers Association, Senate passage of S. 3977 (August 2026)
- Federal Reserve Bank of New York, Household Debt and Credit, Q2 2026 (August 11, 2026)
