The Difference Between Chapter 7 and Chapter 13 Bankruptcy

If you are considering bankruptcy, one of the first questions you will face is which chapter to file. Chapter 7 and Chapter 13 are the two most common options for individuals, and they work very differently. Here is a plain-language breakdown of each — and the key differences between them.

Chapter 7 Bankruptcy

Chapter 7 is often called a liquidation bankruptcy. When you file, a court-appointed trustee reviews your assets to determine whether you own anything that is unprotected and could be sold to pay creditors. In practice, the vast majority of the time there are no assets for the trustee to sell — so the creditors receive nothing and your qualifying debts are wiped out (discharged) at the end of the case.

Debts that Chapter 7 can eliminate include credit card balances and most unsecured obligations. However, certain debts cannot be discharged in Chapter 7, including:

• Certain tax debt
• Owed child support or maintenance (alimony)
• Criminal fines
• Student loan debt
• Certain traffic violations

Because Chapter 7 moves quickly — most cases conclude within a few months — it is often the right fit for people whose income qualifies and who primarily have unsecured debt like credit cards or medical bills. See if you qualify for Chapter 7.

Chapter 13 Bankruptcy

Chapter 13 is sometimes called a Wage-Earner’s Bankruptcy. Instead of wiping out debt all at once, you propose a repayment plan — typically lasting three to five years — based on your income and expenses. At the end of the plan period, remaining qualifying balances are discharged.

Chapter 13 can handle some debts that Chapter 7 cannot, such as parking tickets and tollway fines. It also allows you to catch up on mortgage arrears and keep property you might otherwise lose. Because you repay a portion of what you owe, some lenders view a past Chapter 13 more favorably than a Chapter 7 when you later apply for credit. Learn more on our how bankruptcy helps page.

Key Differences at a Glance

• Speed: Chapter 7 typically concludes in a few months; Chapter 13 lasts 3–5 years.
• Cost: Chapter 7 generally costs less overall because the case is shorter.
• Credit report: Chapter 7 stays on your credit report for 10 years; Chapter 13 for 7 years.
• Credit rebuilding: Chapter 7 allows you to start rebuilding credit sooner after discharge.
• Lender perception: Some lenders favor Chapter 13 because it shows you repaid a portion of your debt through a structured plan.
• Certain debts: Parking tickets and tollway fines can be addressed in Chapter 13 but not in Chapter 7.

Which Chapter Is Right for You?

The right choice depends on your income, the types of debt you carry, and your goals — for example, whether you want to save your home or simply get a fresh start as quickly as possible. At Springer Law Firm, Attorney Daniel Springer handles Chapter 7 and Attorney Michael Blissenbach handles Chapter 13, so you have experienced counsel whichever path fits your situation.

We serve clients throughout Rockford, Winnebago County, and all of Northern Illinois — by phone, email, and Zoom, with no office visit required for most cases.

Questions? Call us at (815) 312-4725 for a free phone consultation, or visit our contact page to get started. We are here to help — no judgment, just answers.