An individual filing for bankruptcy will usually choose between Chapter 7 and Chapter 13. These two options have different rules and procedures. Sometimes, the person filing does not have a choice because bankruptcy law requires a means test to qualify a person for Chapter 7. 

Experian explains that both forms of bankruptcy allow a person to get control over his or her debt and get protection from the bankruptcy court against creditors trying to collect on debts. However, how each option goes about doing that differs greatly. 

Chapter 7 

This type of bankruptcy requires meeting financial restrictions. It is only for filers who cannot pay back their debts. Under Chapter 7, the court will seize any assets not exempt to repay creditors, and then, the court will dismiss all outstanding debts. Essentially, it gives a person a clean slate. Creditors cannot try to collect on debts the court discharges in bankruptcy. A Chapter 7 bankruptcy often takes three to five months to complete. 

Chapter 13 

This type of bankruptcy also goes by the name of the wage earner’s plan. This is because it is a repayment plan structured through the bankruptcy court. The court rarely seizes assets to repay debts under this chapter. Instead, the person filing will create a plan to repay some or all of his or her outstanding debts. This bankruptcy type typically lasts from three to five years as the filer follows the repayment plan. At the end of the bankruptcy, the court will dismiss any unpaid debts. 


With Chapter 7, a person is more likely to lose his or her assets than with Chapter 13. Not everyone will qualify for a Chapter 7 due to the means test. Some people cannot file Chapter 13 because they must show they can repay their debts through the plan. Chapter 13 also takes much longer to get through, which typically means it will cost the individual more money to file. 

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