The Decision Framework
Choosing between Chapter 7 and Chapter 13 comes down to three factors: (1) what you qualify for, (2) what you need to protect, and (3) what you need to accomplish. This guide walks through each factor systematically.
Step 1: Do You Pass the Means Test?
The means test determines Chapter 7 eligibility. If your household income is below your state's median for your household size, you qualify automatically. If above, a detailed calculation of income minus allowed expenses determines eligibility. Start here: means test calculator.
If you don't pass the means test, Chapter 13 is your option (or you can wait until your income drops, or explore Chapter 11 for higher-income filers).
Step 2: Are You Behind on Your Mortgage?
If you're behind on mortgage payments and want to keep your home, Chapter 13 is usually the answer. Only Chapter 13 allows you to cure mortgage arrears over 3-5 years while continuing current payments. Chapter 7 does not provide this cure mechanism.
If your mortgage is current and your equity is within your state's homestead exemption, Chapter 7 works fine for homeowners.
Step 3: Do You Have Non-Exempt Assets?
If you own property that exceeds your state's exemption limits -- significant home equity, valuable vehicles, large bank accounts, investment properties -- Chapter 13 lets you keep everything. In Chapter 7, the trustee could liquidate non-exempt assets.
Most filers have minimal non-exempt assets. If everything you own is within exemption limits, this factor favors Chapter 7 (faster, cheaper).
Step 4: Do You Have Priority Debts?
Priority debts include recent taxes, child support arrears, and certain government fines. These must be paid in full in Chapter 13 and cannot be discharged in Chapter 7. If you owe significant priority debts, Chapter 13 gives you a structured repayment framework.
Step 5: Consider the Success Rates
Chapter 7 has a discharge rate above 93% nationally. Chapter 13 has a discharge rate of approximately 40-50%. This means your odds of success are roughly twice as high in Chapter 7.
Critical data point: In some districts, Chapter 13 discharge rates drop below 30%. Before committing to a 5-year Chapter 13 plan, ask your attorney about your district's completion rate.
Quick Decision Matrix
| Your Situation | Best Chapter | Why |
|---|---|---|
| Below median income, no assets to protect | Chapter 7 | Fastest, cheapest, highest success rate |
| Behind on mortgage, want to keep home | Chapter 13 | Only option to cure arrears |
| Above median income, must repay | Chapter 13 | Don't qualify for Ch. 7 |
| Want to cramdown car loan | Chapter 13 | Cramdown only in Ch. 13 |
| Need fast debt relief | Chapter 7 | Done in 3-4 months |
| Significant non-exempt assets | Chapter 13 | Keep all property |
| Recent luxury purchases or cash advances | Chapter 13 | Avoids fraud presumption issues |
| Mostly medical/credit card debt | Chapter 7 | Clean, fast elimination |
Frequently Asked Questions
Related Topics on This Site
Last updated: April 2026. Not legal advice.
Part of the Bankruptcy Transparency Network