The Difference between Chapter 7 and Chapter 13 Bankruptcy

By Cynthia Podis

Nashville Bankruptcy Lawyer

Chapter 13 Bankruptcy is a repayment plan that lasts between 3 to 5 years versus a Chapter 7 Bankruptcy which wipes out debts without repayment. In Chapter 13 and Chapter 7 bankruptcy, you must list all of your debts and assets in the Bankruptcy Petition (forms filed with the court). Both Chapter 13 and Chapter 7 bankruptcy cases have a Meeting of Creditors where a Bankruptcy trustee reviews the forms and asks questions concerning what you intend to do with certain debts and assets, like cars, houses and other secured items.

You can keep a house, car, or other secured items in a Chapter 7 bankruptcy if you do not have equity over the amount allowed under the Bankruptcy exemptions. In a Chapter 13 bankruptcy, you can keep a house, car, or other secured item, regardless of the value as long as your plan meets the best interest of the creditors test and you can afford the repayment plan.

Chapter 7 filers must meet certain criteria in order to qualify for a discharge in their case. Most importantly, you must not have the ability to repay the debts listed and have a household income less than that in the Means Test (found at ). In Tennessee for a household of 1, income should be less than $42,731; a household of 2 should be less than $53,216; income for a household of 3 should be less than $59,294, etc. If you are over the Means after reasonable deductions are taken, you will not qualify for Chapter 7 relief.

You can file a Chapter 13 bankruptcy even if your income is less than the Means Testing numbers, so long as you can afford the repayment plan which would be between 0% and 100% depending on your financial circumstances.

Chapter 7 has no debt limit, no matter how much you owe, you are not stopped from filing if you meet the other requirements under the Bankruptcy Code.

Chapter 13 limits unsecured debt to $394,725 and secured debt (house, cars, furniture loans) to $1,184,200. If you owe more than the debt limit in either secured or unsecured debt, you cannot get relief under a Chapter 13.

Most clients file a Chapter 13 bankruptcy to keep items they cannot protect under a Chapter 7 bankruptcy or to catch up on house or car payments. Clients file Chapter 13 bankruptcy to allow them to get out from under the stress of overwhelming bills and set up a repayment plan that allows them to enjoy their lives while keeping their assets.


For more information, visit or call 615-399-3800 and schedule a free appointment with us!

Podis and Podis, 1161 Murfreesboro Pike Suite 300, Nashville, TN 37217

We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.

12 thoughts on “The Difference between Chapter 7 and Chapter 13 Bankruptcy”

  1. I didn’t realize that there were different chapters for bankruptcy, so I appreciate the clarifications. It’s interesting to learn that chapter 13 bankruptcy is a repayment plan that lasts 3-5 years. I imagine that since there is so much to learn about this it would be important to hire a lawyer to help out if you were ever in the situation where you needed this.

  2. It’s interesting to read about some of the differences between chapter 7 and chapter 13 bankruptcy. It makes sense that chapter 13 might be a little more lenient on what things you can keep and how you can keep them. It’s something to talk to my brother about because I want to make sure his bankruptcy goes well so I’ll have to tell him he should get professional help.

  3. My brother and his family have been going through tough times and he asked my advice about filing for bankruptcy. I didn’t know that there are two kinds that can be filed for. But I suppose – taking from the comparison chart you have provided, filing for a Chapter 7 bankruptcy is too drastic. Thanks for the great tips, though! It’s helped me understand a lot.

  4. My friends have been thinking about filling for bankruptcy, but don’t know yet. I wanted to look up some information about it so I can better help them make a decision. I didn’t know that Chapter 13 bankruptcy is a repayment plan and Chapter 7 gets rid of all your dept. That is really nice to know! It is great that they have some options available to them! Thank you for all the great information!

  5. Thanks for mentioning that you can keep your house and car if you don’t have equity over an allowed amount when filing for Chapter 7. My husband told me yesterday that we might have to, and I’m worried that we’ll have to liquidate our cars. Now that I know this, maybe there’s a possibility that we can keep at least one of the cars.

  6. My brother wants to file bankruptcy and save his remaining assets. My dad suggested filing Chapter 13 bankruptcy and shared this article with him. It says that Chapter 13 is a repayment plan that lasts three to five years. He can also keep his assets as long as the creditors are happy and he can afford the repayment plan.

  7. It’s nice to learn the difference between these different chapters of bankruptcy. I like the fact that chapter 7 doesn’t have a debt limit. My brother owes a ton of money, so this is something he’ll have to consider.

  8. Basically, as your article suggests, Chapter 13 bankruptcy will take around 3 to 5 years to pay while Chapter 7 would be an instant wipeout of debts without repayment. That sounds like completely reasonable as the debt range does differ significantly from the two. I’ll be sure to read more about these Chapters just to make sure I can avoid them if I ever venture into the business market. Thanks!

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