Chapter 7 vs. Chapter 13 Bankruptcy: How Each Proceeds

This is a general overview of United States bankruptcy law, not Japan’s insolvency system or advice on an individual case.

Chapter 7 liquidates nonexempt property and wipes out most unsecured debt in about four to six months, with no repayment plan. Chapter 13 keeps you under court supervision for three to five years while you pay creditors through a trustee, usually to save a house from foreclosure or a car from repossession. The means test assesses presumed abuse in a consumer Chapter 7 case; it does not alone determine eligibility for Chapter 7 or Chapter 13.

What follows is both cases run forward in order: what the court does, what the trustee does, and when. The comparison table in the middle covers the practical differences, and the sections after it cover the two things people search for most once they understand the basics — what a missed Chapter 13 payment actually triggers, and which chapter a given set of facts usually leads to.

What happens the moment you file

The automatic stay under 11 U.S.C. 362(a) takes effect when the clerk dockets your petition. No hearing, no judge’s signature, no waiting period. From that instant, most collection activity against you is illegal: calls, letters, lawsuits, repossessions, scheduled foreclosure sales, and wage garnishment all have to stop, which is why timing a filing matters if you want to understand how wage garnishment actually works against your paycheck.

Repeat filings can limit the automatic stay. For an individual covered by Section 362(c)(3), a case pending within the preceding year and dismissed can cause the stay to terminate with respect to the debtor 30 days after the new filing. An extension requires notice and a hearing completed within that period and the required showing of good faith. Under Section 362(c)(4), two or more qualifying dismissed cases in the preceding year can prevent the stay from taking effect; a request to impose a stay must be made within 30 days and satisfy that provision. Both provisions contain an exception for a case refiled under a chapter other than Chapter 7 after dismissal under Section 707(b).

The two chapters diverge in what the stay buys you. In Chapter 7, it is a pause. A car lender or mortgage servicer can file a motion for relief from stay, and because there is no mechanism in Chapter 7 to catch up arrears over time, you generally have to reaffirm the debt, redeem the collateral in a lump sum, or surrender it. In Chapter 13, the stay normally lasts the life of the case, and past-due amounts get folded into the plan and cured over three to five years while you make the regular payment going forward. That single difference drives most Chapter 13 filings.

The means test: who qualifies for which chapter

For individual Chapter 7 debtors with primarily consumer debts, Form 122A-1 is the starting point, subject to applicable exemptions. Current monthly income under Section 101(10A) is generally the monthly average for the six full calendar months before filing. Follow the official form’s income categories and instructions: regular contributions to household expenses are included, while Social Security benefits and certain other listed payments are excluded. Annualize the calculated amount and use the form to compare it with the applicable state and household-size median. At or below the median, the means-test presumption of abuse does not arise; this is not automatic eligibility for Chapter 7, and other filing, abuse and discharge requirements still apply.

Those median figures are not static. The U.S. Trustee Program publishes them from Census Bureau data and applies updated tables to cases filed on or after a stated date, with revisions landing roughly twice a year — one set took effect April 1, 2026, another on July 15, 2026. The figure that matters is the one in force the day you file, not the day you start gathering paperwork.

Here is the arithmetic on a worked example. Take a household of three in Alabama, where the table for cases filed on or after July 15, 2026 sets the median at $92,698 for a three-person family. For this simplified example, assume wages are the only income included under the form and total $52,500 over the six-month period. Current monthly income is $8,750, annualized to $105,000 — about $12,300 over the median. The example is above median, so the next step is Form 122A-2; that result alone does not rule out Chapter 7.

Step two deducts IRS-allowed expense standards and actual secured-debt payments, not your real grocery bill. A simplified version of that ledger might look like this:

• IRS national standards for food, clothing, and personal care: $1,740
• Local standard for housing and utilities, non-mortgage portion: $600
• Average monthly mortgage payment over 60 months (secured debt): $1,450
• Vehicle ownership and operating allowances: $900
• Payroll taxes: $1,450
• Health insurance and out-of-pocket care: $500
• Childcare: $650
• Term life and mandatory payroll deductions: $200

That totals $7,490, leaving $1,260 a month in disposable income. Multiplied by 60, that is $75,600 — far above the dollar thresholds in Section 707(b)(2), which are fixed in the Code and adjusted for inflation every three years (the current figures print on Form 122A-2 itself). A presumption of abuse arises, and the U.S. Trustee or another party can move to dismiss the Chapter 7 case or convert it.

Now change one input. Give the same household a larger mortgage and two car payments, adding $2,100 of allowed deductions. In this simplified calculation, disposable income goes negative and the means-test presumption does not arise; other Chapter 7 requirements still apply. That is the part generic comparison charts skip: being over median does not disqualify you, it just moves you to the second form.

The $1,260 figure illustrates the simplified Chapter 7 calculation above; it does not establish a Chapter 13 payment. Chapter 13 uses separate 122C forms, and the required plan payments depend on the applicable income calculation and plan-confirmation requirements. A presumption of abuse in Chapter 7 does not automatically require or establish eligibility for Chapter 13; it may be rebutted under Section 707(b)(2)(B), or another available chapter may be considered if its requirements are met.

Chapter 7 step by step: filing to discharge

1. Day 1 — petition filed. The stay attaches, a trustee is assigned, and the court mails a notice with your case number, trustee’s name, and the date of the meeting of creditors.
2. Roughly days 21 to 40 — the 341 meeting. The U.S. Courts’ guidance is that the trustee holds the meeting of creditors between 21 and 40 days after the petition is filed, stretching to no more than 60 days in locations without regular trustee staffing. No judge attends. You answer questions under oath about your schedules; it is usually short.
3. Trustee review. The trustee compares your asset schedules against your claimed exemptions and looks for anything unprotected worth selling — a second vehicle, a tax refund already earned but not yet received, a recoverable payment you made to a relative before filing.
4. 60 days after the first scheduled meeting date — objection deadline. Creditors and the trustee have that window to object to discharge or to the dischargeability of a particular debt.
5. Discharge. Where nobody objects, the court generally enters the discharge order 60 to 90 days after the date first set for the meeting of creditors, and more than 99 percent of individual Chapter 7 cases that are neither dismissed nor converted end in a discharge.

Most consumer cases are "no-asset" cases: the trustee files a report that there is nothing to distribute, no property is sold, and the file closes days after discharge. When the trustee does find nonexempt property, the discharge can still enter on schedule while the case stays open for months longer so the liquidation and distribution can finish. You also have to complete the post-filing debtor education course — skip it and the case can close with no discharge at all.

Chapter 13 step by step: filing to plan completion

1. Day 1 — petition plus plan. The proposed repayment plan is filed with the petition or within 14 days after it. The plan states what you pay the trustee each month, for how long, and how the money is split among mortgage arrears, car loans, priority taxes, support obligations, attorney fees, and whatever is left for general unsecured creditors.
2. Within 30 days — first payment. You begin paying the trustee before the court has confirmed anything. If the plan is never confirmed, the trustee returns the money less fees.
3. Roughly days 21 to 50 — the 341 meeting. Same format as Chapter 7, but the trustee’s focus is feasibility: can you actually make this payment every month for years?
4. Within 45 days of that meeting — confirmation hearing. No later than 45 days after the meeting of creditors, the judge must hold a confirmation hearing and decide whether the plan is feasible and meets the Code’s standards. Creditors get 28 days’ notice and can object — most commonly that they would receive more in a Chapter 7 liquidation, or that the plan does not commit all projected disposable income.
5. Months 1 through 36 or 60 — the plan runs. The trustee receives your payments, takes a percentage fee, and disburses to creditors according to the confirmed plan. Plan length is set by the same median comparison as the means test: if current monthly income exceeds the state median, the plan generally must run five years, and no plan may exceed five years.
6. Discharge. After the final payment, the financial management course, and certification that domestic support obligations are current, the court discharges the remaining eligible balances.

The practical shape of a Chapter 13 is that the first two months are busy, the confirmation fight (if there is one) happens in month two or three, and then nothing happens for years except payments — until income changes, a car dies, or a payment is missed.

Chapter 7 vs. Chapter 13 side by side

Factor	Chapter 7	Chapter 13
Core eligibility	Means-test rules where applicable, plus other eligibility requirements. A prior Chapter 7 discharge bars another if the earlier case began within 8 years before the new filing.	Regular income; secured and unsecured debts under statutory caps
Court filing fee	$338 ($245 filing + $78 administrative + $15 trustee surcharge)	$313 ($235 filing + $78 administrative)
Typical duration	4 to 6 months, petition to discharge	36 to 60 months of payments, then discharge
Your property	Trustee may sell anything not covered by exemptions	You keep everything; creditors must get at least Chapter 7 liquidation value through the plan
Mortgage arrears	No cure mechanism; lender can seek relief from stay	Arrears cured over the plan while you resume regular payments
Car loan	Reaffirm, redeem, or surrender	Pay through the plan; some older loans can be reduced to collateral value
First money out of pocket	Fee and attorney fees up front; attorney usually requires payment before filing	Smaller up-front cost; attorney fees often paid through the plan
Trustee’s job	Find and liquidate nonexempt assets, then close	Collect and disburse payments for years, monitor compliance
Credit report	10 years from the filing date	7 years from the filing date

The credit report row misleads people. Chapter 13 drops off three years sooner, but the clock starts at filing in both chapters — so a completed five-year Chapter 13 has roughly two years left on the report the day you get your discharge, while a Chapter 7 discharged in month five still has about nine and a half years to run.

What happens if you miss a Chapter 13 plan payment

One missed payment is a problem, not a catastrophe, and the sequence is fairly predictable. Trustees generally do not react to a single late payment; their systems flag accounts that fall behind by a threshold amount or number of months, and practice varies by district. What follows is a notice of default or a motion to dismiss filed with the court, served on you and your attorney, with a hearing date attached.

That filing starts a cure period. In many districts the motion carries conditional language: pay the arrears by a stated date and the motion is withdrawn or an agreed order is entered giving you a set number of months to catch up. Miss the conditional deadline and the dismissal order can enter without another hearing.

If the shortfall is structural rather than temporary — hours cut, a job lost, a medical event — the tool is a plan modification under Section 1329. You file a modified plan that lowers the monthly payment, extends the term (never past 60 months total), or moves a surrendered vehicle out of the plan. Creditors can object, and the modified plan still has to pay unsecured creditors at least Chapter 7 liquidation value.

Three outcomes are possible if the default is not fixed. The case can be dismissed for cause under Section 1307(c), which ends the automatic stay and lets every creditor resume where it left off, with interest and fees that accrued during the case still owed. The case can be converted to Chapter 7, which is sometimes the better result — debts get discharged instead of the clock resetting. Or, if you have completed a substantial share of the plan and the failure is from circumstances you cannot be held accountable for, you can ask for a hardship discharge under Section 1328(b), which is narrower than a completed-plan discharge. A dismissal may also affect the stay in a later case under the timing rules and exceptions in Section 362(c)(3) and (4), described above.

Which chapter a given situation typically leads to

These examples describe possible considerations, not eligibility decisions; the requirements of the relevant chapter and the facts of the case still matter:

• Income at or below the state median, few or no nonexempt assets, no secured property you are behind on. Chapter 7 may be an option. The means-test presumption does not arise, but eligibility, discharge requirements and the trustee’s asset review still apply.
• Income above median but allowed deductions eat it. Chapter 7 is still possible. This is the step-two case worked through above.
• Income above median with disposable income remaining after the allowed deductions. The calculation may create a presumption of abuse under Chapter 7, subject to the statutory thresholds and possible rebuttal. Chapter 13 may be an option only if its separate requirements are met.
• Behind on a mortgage you intend to keep. For an eligible debtor with a feasible repayment plan, Chapter 13 can provide a way to cure mortgage arrears. Filing and foreclosure timing still matter — it helps to know how a home foreclosure actually unfolds so the stay lands before the sale, not after.
• Nonexempt equity you want to keep — a paid-off second car, a rental property, an inheritance. Chapter 13 may allow the asset to be retained if eligibility and plan-confirmation requirements are met, including paying unsecured creditors at least what they would receive in a Chapter 7 liquidation.
• Debts that survive discharge, like recent taxes or support arrears. Chapter 13 gives you a structured way to pay them off under stay protection, which Chapter 7 does not.

Exemption rules are state law and vary enormously, so the same assets can be fully protected in one state and exposed in the next. That alone can flip the answer, and it is the main reason this is a conversation to have with a bankruptcy attorney in your district rather than a decision to make from a chart.

Frequently asked questions

Can you switch from Chapter 13 to Chapter 7 mid-case? Yes. Section 1307(a) gives a Chapter 13 debtor the right to convert to Chapter 7 at any time, and the right cannot be waived. The court charges a small conversion fee — $25 in the published fee schedules, made up of a $15 trustee fee and a $10 filing differential. Converting resets the case to the Chapter 7 track: new trustee duties, a new meeting of creditors, and exposure of nonexempt assets that the plan had been protecting.

Does either chapter wipe out student loans or taxes? Not as a rule. Student loans require a separate adversary proceeding and a showing of undue hardship. Income taxes can be dischargeable only if they meet all the age, filing, and assessment conditions in Section 523, and recent taxes and trust-fund taxes generally are not. Domestic support obligations are never discharged. The U.S. Courts’ guidance is blunt that not all debts are discharged in Chapter 7, and this is where a discharge most often disappoints people.

How long before you can file again? A second Chapter 7 discharge requires eight years from the first Chapter 7 filing date. Chapter 13 after a Chapter 7 discharge requires four years; Chapter 13 after a Chapter 13 discharge requires two. These discharge waiting periods do not themselves prohibit filing, but other eligibility rules and repeat-filing stay limits may apply.

Does the trustee take your tax refund? In Chapter 7, a refund for income already earned before filing is an asset of the estate and is taken unless an exemption covers it. In Chapter 13, many districts require refunds above a set amount to be turned over to the plan; check the local rules and the confirmed plan language.

To understand the income screening, gather income records for the relevant six-month period and follow Official Form 122A-1, including its income categories and statutory exclusions. The annualized comparison with the applicable U.S. Trustee Program median table is one step, not a decision about which chapter is available. Eligibility, assets, debts, prior cases and any proposed repayment plan require separate review.