Thousands of Pennsylvania residents file for bankruptcy yearly, but few fully understand the differences between Chapter 7 and Chapter 13. Filing the wrong chapter can delay your case, cost you money, or even put your home or car at risk.
This guide compares the Difference Between Chapter 7 and Chapter 13 Bankruptcy to help you determine which may better suit your financial situation in Pennsylvania.
What Is Chapter 7 Bankruptcy?
Chapter 7, commonly referred to as “liquidation bankruptcy,” is a legal process designed to discharge unsecured debts for individuals who meet income-based eligibility requirements.
If you qualify, most unsecured debts — like credit cards, medical bills, and personal loans — can be fully discharged. That means you no longer have to pay them.
However, Chapter 7 also looks at your assets. If you own valuable property beyond what Pennsylvania or federal exemptions protect, it could be sold to repay creditors. The good news? Many local filers have “no-asset” cases, meaning they keep everything they own and still get a fresh start through Chapter 7 debt relief services.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is known as a “reorganization plan.” Instead of wiping out debt immediately, you set up a court-approved repayment plan lasting three to five years.
It’s a good option for individuals with steady income who want to catch up on missed mortgage, car, or tax payments while keeping their property. Under Chapter 13, you pay back some or all of your debts based on your income, expenses, and the value of your assets.
The process is closely supervised by the court to make sure payments are made fairly. With help from a Chapter 13 bankruptcy attorney, many filers can save their homes, stop repossessions, and regain control of their finances.
Key Differences Between Chapter 7 and Chapter 13 Bankruptcy
While both Chapter 7 and Chapter 13 are part of the bankruptcy filing process, they work very differently. Choosing the right one depends on your income, assets, and goals.
Here’s a quick breakdown:
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Type of Process | Liquidation (some assets may be sold) | Reorganization (payment plan over 3–5 years) |
| Eligibility | Must pass a means test (based on income) | Must have a regular income to fund a repayment plan |
| Debt Discharge | Most unsecured debts are discharged quickly | Some debts are repaid through the plan; the remaining may be discharged |
| Asset Treatment | Non-exempt assets may be sold | Keep property by repaying debts over time |
| Impact on Credit | Remains on your credit report for up to 10 years | Remains on your credit report for up to 7 years |
| Typical Use Case | Low-income, high unsecured debt, few assets | Higher income, need to save home or a car |
Chapter 7 is typically faster and wipes out debt quickly. Chapter 13 gives you time to catch up and protect valuable property, but it requires ongoing payments.
How to Qualify for Each Chapter
Not everyone can choose freely between Chapter 7 and Chapter 13. The Difference Between Chapter 7 and Chapter 13 Bankruptcy often comes down to eligibility, which depends on your income, expenses, and debts.
Qualifying for Chapter 7
Failing the means test usually means Chapter 13 will be your next option.
Qualifying for Chapter 13
You must show you have a steady income to afford a repayment plan. Your debts must also fall within certain limits (updated regularly by the courts).
Secured debt limit: Around $1,580,125
Unsecured debt limit: Around $526,700
Accurate documentation of all income, expenses, and debts is crucial during the bankruptcy filing process. Mistakes can delay your case or cause dismissal, so it’s smart to start with a file for bankruptcy consultation to review your situation properly.
When Chapter 7 Might Be Better for You
Chapter 7 could be the better choice if you’re overwhelmed by unsecured debts and don’t have major assets at risk.
It’s a strong fit if:
Most of your debt comes from credit cards, medical bills, or personal loans.
You’re behind on payments with no realistic way to catch up.
Your income is too low to afford a multi-year repayment plan.
You don’t own expensive property that could be sold by the court.
Chapter 7 offers a fast, fresh start, often wiping out eligible debts within a few months. Many individuals filing under Chapter 7 in Pennsylvania complete the process without losing any property, especially when working with an experienced bankruptcy attorney.
When Chapter 13 Might Be Better for You
Chapter 13 is the better option if you have steady income and need time to catch up on important debts while keeping your property.
It’s a strong fit if:
You’re behind on mortgage payments and want to stop foreclosure.
You’re behind on a car loan and want to prevent repossession.
You have valuable property that would be at risk in Chapter 7.
You want to protect co-signers from collection actions.
You need to restructure debts like taxes, past-due child support, or car loans.
Chapter 13 creates a plan to pay what you can afford over 3–5 years, and at the end, remaining unsecured debts may be discharged. With help from Chapter 13 bankruptcy attorney services, many people use Chapter 13 to save their homes, vehicles, and financial futures.
Conclusion: The “Better” Option Depends Your Income Level, Debts, and Your Goals
Selecting the appropriate bankruptcy chapter depends on your income level, types of debt, and financial goals. Chapter 7 offers quicker relief for those with minimal assets and low income, while Chapter 13 provides structured repayment for those seeking to retain property.
If you’re uncertain which option is right for you, it’s essential to speak with a professional who understands Pennsylvania’s bankruptcy laws and local court procedures.