Chapter 7 vs Chapter 13: Costs, Eligibility and How Each Impacts Your Credit

When bankruptcy becomes an option: a quick guide

If you’re weighing bankruptcy, the central choice for most consumers is Chapter 7 (liquidation) vs Chapter 13 (repayment plan). Both provide an automatic stay that stops most collection actions, but they differ sharply in how long cases last, what you must pay, who qualifies, and how long the filing remains on your credit reports. This article lays out the practical costs, eligibility tests, typical timelines and how each chapter affects future credit so you can discuss options more confidently with a counselor or attorney.

Key short answers:

• Chapter 7 usually leads to a fairly quick discharge (often within ~4 months) but may require surrender of nonexempt property.
• Chapter 13 keeps your property under a court-approved 3–5 year repayment plan; discharge occurs after completing plan payments.
• Bankruptcy stays on credit reports: Chapter 7 typically for 10 years from filing, Chapter 13 for 7 years.
• Federal filing fees are modest (Chapter 7: $338; Chapter 13: $313) but attorney fees and plan payments usually make total costs higher.

The paragraphs below explain why those differences matter and what you should expect before, during and after filing.

Eligibility: means test, debt limits and who can file

Chapter 7 eligibility is governed by the “means test,” which compares your recent income (usually the average of the last six months) to your state’s median household income for a household of your size. If your income is at or below the median you generally pass the first step of the means test; if it’s above, you proceed to the second step that evaluates allowable expenses and disposable income. Because median figures and expense standards are updated regularly, run current calculations before deciding.

Chapter 13 requires regular income and has statutory debt ceilings (amounts are adjusted periodically). Effective April 1, 2025 the Chapter 13 thresholds are approximately $1,580,125 in secured debt and $526,700 in unsecured debt; if your noncontingent, liquidated debts exceed these caps you typically cannot file Chapter 13. The dollar amounts change on a triennial schedule, so confirm the limits that apply on your filing date.

Other practical eligibility notes:

• You must complete an approved pre‑filing credit counseling course before filing (all chapters).
• Some debts aren’t dischargeable (certain taxes, most student loans, child support, recent fraud claims); Chapter 13 can sometimes address a few liabilities Chapter 7 cannot, but both have limits.
• Local court rules and exemptions (what you can keep) vary by state — consult local guidance or an attorney.

Costs and timeline: filing fees, attorney fees, trustee/plan costs

Court filing fees are set by statute and are the predictable portion of the cost: as of 2025 the standard fees are about $338 for Chapter 7 and $313 for Chapter 13 (fees vary only slightly by breakdown of administrative surcharges). These amounts are paid to the court when you file (fee waivers or installment plans may be available in hardship cases).

Attorney fees are the largest variable and differ by chapter and local market. Typical ranges reported by legal publishers and practitioners in 2024–2025 are roughly:

• Chapter 7: often between $1,000 and $3,000 (flat-fee arrangements are common).
• Chapter 13: commonly higher — often $2,500 to $5,000 or more — and most plans allow attorney fees to be paid through the repayment plan.

Typical timelines:

• Chapter 7: the trustee’s meeting (341 meeting) occurs within weeks and a discharge often follows within about 60–120 days if there are no objections; many consumer Chapter 7 cases close in roughly 3–6 months.
• Chapter 13: the case runs on the confirmed plan (normally 3 years if under-median income or 5 years if above); discharge follows completion of plan payments (exceptions exist for hardship discharges).

Other costs to budget for: credit‑counseling and debtor‑education course fees ($15–$50 typically), possible trustee or plan administration costs included in Chapter 13, and replacement/repair costs if you want to keep certain secured property (e.g., reaffirmation or redemption on a car).

How each chapter affects your credit and rebuilding steps

Immediate impact: filing for bankruptcy is generally one of the most negative items a credit model can record, and many people see a substantial point drop after filing (the exact amount varies depending on your starting score and other negative items). Lenders also view an active bankruptcy or recent discharge as increased risk, which affects approvals and pricing (higher interest rates or larger down payments may be required).

Public-record reporting windows: accurately reported bankruptcies remain on credit reports for set periods — Chapter 7 is commonly reported for up to 10 years from the filing date, while completed Chapter 13 cases are typically reported for 7 years from the filing date. After the reporting period expires, the bankruptcy should no longer appear on bureau reports. Check reports for accuracy and dispute any incorrect entries.

Practical differences for rebuilding:

• With Chapter 7 you receive a faster fresh start (discharge sooner) but the 10‑year public record window is longer; rebuilding usually begins after discharge.
• With Chapter 13 you’re making payments during the life of the plan; on some credit reports creditors may still report during the plan (reporting behavior varies), but a successful Chapter 13 ends up removed sooner (7 years) and completing a plan can be favorably viewed by certain lenders because it shows on-time performance under a court plan.

Rebuilding checklist (practical steps many advisers recommend):

1. Confirm discharge and wait ~90–120 days for credit reports to update, then pull reports from all three bureaus and review for errors.
2. Start with low-risk products: secured credit cards, credit‑builder loans or becoming an authorized user on a seasoned account; keep utilization low and pay on time.
3. Use rent/utility reporting tools and on-time rent payments where possible to rebuild positive tradelines. (Availability and effectiveness vary by product.)
4. Monitor your credit and be cautious with new credit offers—avoid costly high‑interest products that can set back progress.

Note: recent regulatory and reporting changes (for example, the CFPB and bureaus’ evolving treatment of medical debt and other items) affect how quickly scores can recover and what lenders see; stay current with bureau guidance and consumer-protection updates.

Bottom line: Chapter 7 is often faster and less expensive in immediate out‑of‑pocket terms but remains on reports longer; Chapter 13 lets you keep more property and may show a record of payments, but it requires a multi‑year commitment and typically has higher total costs. Which is better depends on income, assets, debt type and long-term goals. Consult a reputable bankruptcy attorney or a nonprofit credit‑counseling agency to run your numbers and evaluate alternatives before filing.