Decision Framework

Should I File Chapter 7
or Chapter 13?

Walk through five key questions to determine which bankruptcy chapter fits your situation. Each question narrows the decision based on your income, assets, debts, and goals.

Quick Chapter Finder

1. Is your household income above your state's median?

2. Are you behind on your mortgage or car payments?

3. Do you have a cosigner on any of your debts?

Step 1: Do You Pass the Means Test?

The Income Question

The means test is the first gate. It compares your household income over the past 6 months to your state's median income for a household of your size.

If your income is below the state median: You pass the means test and qualify for Chapter 7. Move to Step 2.

If your income is above the state median: A detailed expense calculation determines whether you have enough disposable income to fund a Chapter 13 plan. If your disposable income is too high, you may be directed to Chapter 13.

Below median income: Chapter 7 is likely available. Continue to Step 2 to confirm it is the right choice.

Above median income with significant disposable income: Chapter 13 is likely your path. But continue -- there may be reasons Chapter 13 is preferable even if you pass the means test.

Check your eligibility: Use the free means test calculator at meanstest.org to determine whether you pass. Median income thresholds vary by state and household size and are updated periodically.

Step 2: Do You Have Assets at Risk?

The Property Question

In Chapter 7, a trustee can sell non-exempt assets to pay creditors. The key is whether your assets fall within your state's exemption limits.

Common exemptions include:

  • Homestead exemption: Protects equity in your primary residence (varies widely -- $5,000 in some states to unlimited in Texas/Florida)
  • Vehicle exemption: Typically $2,000-$6,000 in equity
  • Personal property: Household goods, clothing, tools of the trade
  • Retirement accounts: 401(k), IRA, pension -- fully exempt in all states
  • Wildcard exemption: Available in some states for any property

All assets within exemptions: Chapter 7 is still a good option. Most Chapter 7 cases are "no-asset" cases.

Significant non-exempt assets: Chapter 13 lets you keep everything. You pay the value of non-exempt assets through your plan instead of surrendering them.

Step 3: Are You Behind on Your Mortgage or Car?

The Secured Debt Question

If you are behind on a mortgage or car loan and want to keep the property, this is one of the most important factors.

Current on all secured debts: Chapter 7 works. You reaffirm the loan and keep paying.

Behind on mortgage: Chapter 13 is specifically designed to cure mortgage arrears. You catch up over 3-5 years while staying in your home. Chapter 7 cannot cure mortgage arrears.

Behind on car loan: Chapter 13 can cure car loan arrears. If your loan is more than 910 days old, you may be able to cramdown the loan to the car's current value -- potentially saving thousands.

Step 4: Do You Have Cosigners?

The Cosigner Question

In Chapter 7, the automatic stay protects you but not your cosigners. Creditors can immediately pursue cosigners for the full debt balance.

In Chapter 13, the codebtor stay (11 U.S.C. § 1301) protects cosigners on consumer debts during your plan. As long as you are paying the debt through the plan, creditors cannot collect from your cosigner.

No cosigners (or cosigners can handle the debt): Chapter 7 is fine.

Cosigners you want to protect: Chapter 13's codebtor stay shields them during the plan. This is especially important for parent PLUS loans, cosigned car loans, and cosigned credit cards.

Step 5: Have You Filed Bankruptcy Before?

The Prior Filing Question

Federal law imposes waiting periods between discharges. If you have a prior bankruptcy, check these windows:

  • Prior Chapter 7: Must wait 8 years for another Chapter 7 discharge, but only 4 years for a Chapter 13 discharge
  • Prior Chapter 13: Must wait 6 years for a Chapter 7 discharge (with exceptions), but only 2 years for another Chapter 13 discharge

Check your dates: Use the free discharge eligibility screener at 1328f.com to calculate your specific waiting period based on your prior filing date and chapter.

The Decision Summary

Chapter 7 is usually the better choice if: You pass the means test, your assets are within exemptions, you are current on secured debts, you have no cosigners to protect, and you want the fastest path to a fresh start. The 93%+ discharge rate and 3-4 month timeline make it the strongest option for most qualifying filers.

Chapter 13 is the better choice if: You are behind on your mortgage, you have non-exempt assets, you earn too much for Chapter 7, you need cosigner protection, or you need the superdischarge. But go in with open eyes: the 40-50% national discharge rate means the plan must be realistic and your income must be stable for 3-5 years.

Frequently Asked Questions

What if I qualify for Chapter 7 but want to keep non-exempt assets?
You can choose to file Chapter 13 instead, even if you qualify for Chapter 7. In Chapter 13, you pay the value of your non-exempt assets to creditors through the plan but keep the property. This is a common reason high-asset filers choose Chapter 13 voluntarily.
Can I switch chapters after filing?
Yes. You can convert from Chapter 13 to Chapter 7 (almost absolute right under § 1307(a)) or from Chapter 7 to Chapter 13 (§ 706(a)). This provides a safety net if your circumstances change after filing.
My attorney is recommending Chapter 13 even though I qualify for Chapter 7. Why?
There may be legitimate reasons -- mortgage arrears, non-exempt assets, cosigner protection, or tax debts. But be aware that Chapter 13 typically generates $3,000-$5,000 in attorney fees (paid through the plan) compared to $1,000-$2,500 for Chapter 7. Ask your attorney to explain specifically why Chapter 13 is better for your situation, and consider getting a second opinion.

Related Resources

Last updated: March 2026. This is educational information, not legal advice.

Cited in Federal Rules Suggestion 26-BK-3

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