For most Californians considering bankruptcy, the choice comes down to two chapters of the federal Bankruptcy Code: Chapter 7 and Chapter 13. They reach the same destination — a fresh financial start — by very different routes. Chapter 7 erases qualifying debts quickly and usually keeps no payment plan; Chapter 13 reorganizes your debts into a structured repayment plan that lasts three to five years. Understanding the trade-offs between them is one of the most consequential decisions you will make in a bankruptcy, because the right chapter can save your home, your car, and thousands of dollars.
This guide explains general information about California and federal bankruptcy law and is not legal advice. The figures and rules described here change over time, and your situation may turn on facts not addressed here. For advice about your circumstances, consult an attorney licensed by the State Bar of California.
Chapter 7 in a nutshell
Chapter 7 is called “liquidation” bankruptcy because, in theory, a trustee can sell your nonexempt property to pay creditors. In reality, most consumer Chapter 7 cases are “no-asset” cases: California’s exemptions protect everything the filer owns, nothing is sold, and the qualifying unsecured debts are simply wiped out. Chapter 7 is fast — a typical case runs about four months from filing to discharge. It is the right tool for people who have mostly unsecured debt (credit cards, medical bills, personal loans), little or no nonexempt property, and income low enough to pass the means test. You do not propose a repayment plan and you make no payments to a trustee for distribution to creditors.
Chapter 13 in a nutshell
Chapter 13 is the “wage earner’s plan.” Instead of liquidating, you keep all your property and repay some or all of your debts through a court-approved plan funded by your regular income. Plans last three years for below-median filers and five years for above-median filers. You make a single monthly payment to the Chapter 13 trustee, who distributes it to creditors according to the plan. Unsecured creditors are typically paid only what they would have received in a Chapter 7 — sometimes pennies on the dollar, sometimes nothing — while you bring secured debts like a mortgage arrearage current over time. At the end of a completed plan, remaining qualifying balances are discharged.
When Chapter 7 is the better fit
Chapter 7 usually makes sense when:
- Your income is below the California median, or you pass the means test after expense deductions.
- Most of your debt is unsecured and dischargeable.
- You have little nonexempt property to lose.
- You are not significantly behind on a mortgage or car loan you want to keep.
- You want the fastest possible fresh start with no multi-year commitment.
Because Chapter 7 wipes the slate quickly and requires no plan payments, it is the most common chapter for California consumers and often the cheapest to complete.
When Chapter 13 is the better fit
Chapter 13 is often the better — or only — choice when:
- You are behind on a mortgage and want to stop foreclosure and catch up on the arrears over time.
- You have a car loan you want to keep and possibly restructure.
- Your income is too high to pass the Chapter 7 means test.
- You have nonexempt property you want to protect from liquidation by paying its value into the plan.
- You have certain debts — like recent taxes or support arrears — that you can manage through a structured plan.
- You received a Chapter 7 discharge too recently to get another one.
Chapter 13’s great advantage is that it lets you keep property while curing defaults, something Chapter 7 cannot do.
Key differences side by side
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Length | About 4 months | 3 to 5 years |
| Repayment plan | None | Required monthly plan |
| Income test | Must pass the means test | Needs regular income |
| Nonexempt property | May be sold by trustee | Kept; value paid into plan |
| Mortgage arrears | Cannot cure | Can cure over time |
| Discharge timing | At case close | After plan completion |
The means test and which chapter you qualify for
The means test is the gatekeeper for Chapter 7. It compares your average household income for the six months before filing to the California median family income for your household size. If you are below the median, you pass and can choose Chapter 7. If you are above the median, a second calculation deducts allowed living expenses to see whether you could fund a repayment plan; if you could, Chapter 7 is presumed abusive and you are steered toward Chapter 13. The same income figures that disqualify some filers from Chapter 7 also set the length of a Chapter 13 plan — three years if below median, five years if above. For a full walkthrough, see our guide to the California means test.
How California exemptions affect your choice
California has opted out of the federal exemptions, so every filer uses one of two California exemption systems — the “704 system” with its large homestead, or the “703 system” with its generous wildcard. The exemptions matter to chapter choice because they determine how much property is at risk. In Chapter 7, anything not covered by an exemption can be sold; if you have valuable nonexempt assets, Chapter 13 may let you keep them by paying their value into the plan. A homeowner with large equity, for example, might use the 704 homestead to protect the home in either chapter, while a filer with significant nonexempt savings might prefer Chapter 13 to avoid liquidation. Our guide to California bankruptcy exemptions explains the two systems in depth.
What happens to your property in each chapter
The most important practical difference between the two chapters is what happens to property you cannot fully protect with an exemption. In Chapter 7, the trustee can sell nonexempt property and pay the proceeds to creditors. In most consumer cases nothing is sold because exemptions cover everything, but if you own, say, a paid-off second vehicle, a valuable collection, or substantial nonexempt savings, those assets are at risk. In Chapter 13, you keep all of your property — nothing is liquidated — but you must pay your unsecured creditors at least the value of your nonexempt property over the life of the plan. This “best interests of creditors” rule ensures creditors receive at least what they would have gotten in a Chapter 7. So Chapter 13 lets you protect nonexempt assets by paying for the privilege, while Chapter 7 trades speed for the risk of losing them.
Special tools available only in Chapter 13
Chapter 13 offers several powerful tools that Chapter 7 does not. You can cure mortgage arrears over the life of the plan to stop a foreclosure and keep your home. In some cases you can “cram down” a car loan — reducing the balance to the vehicle’s value — if you bought the car more than 910 days before filing. You may be able to strip a wholly unsecured junior mortgage (such as a second mortgage on a home that is worth less than the first mortgage balance) so it is treated as unsecured debt. And you can spread out certain nondischargeable debts, like recent tax obligations, into manageable monthly payments protected by the automatic stay. These options make Chapter 13 the chapter of choice for homeowners and people with significant secured debt, even when they could technically qualify for Chapter 7.
California statutes and federal authority
Both chapters are creatures of federal law — Chapter 7 and Chapter 13 are titles within the Bankruptcy Code (title 11 of the United States Code), and the automatic stay that protects you in either chapter comes from 11 U.S.C. § 362. What California contributes is the exemption law that decides what you keep. California has opted out of the federal exemptions under 11 U.S.C. § 522(b), so filers choose between Code of Civil Procedure § 704 (the 704 system, including the homestead exemption in CCP § 704.730) and Code of Civil Procedure § 703.140(b) (the 703 system, with its wildcard in § 703.140(b)(5)). The same statutes apply whether you file Chapter 7 or Chapter 13.
The discharge in each chapter
Both chapters end in a discharge — the federal court order that erases your personal liability for qualifying debts — but the timing and scope differ. In Chapter 7, the discharge usually arrives about three to four months after filing, once the trustee has finished reviewing your case. In Chapter 13, the discharge comes only after you complete every payment under your three-to-five-year plan, so it requires sustained commitment. The categories of debt that survive a discharge — most taxes, child and spousal support, most student loans, and debts from fraud — are largely the same in both chapters. Chapter 13’s discharge has historically been somewhat broader in a few narrow areas, but for most consumers the practical list of nondischargeable debts is the same either way. The key difference is that Chapter 7 delivers relief fast, while Chapter 13 makes you earn it over years in exchange for keeping property and curing defaults.
How often you can file
There are time limits on receiving repeated discharges, and they can steer your choice. To receive a Chapter 7 discharge, you generally must wait eight years from the filing date of a prior Chapter 7 that resulted in a discharge. The waiting periods involving Chapter 13 are shorter — for example, you generally must wait four years after a Chapter 7 discharge before a Chapter 13 discharge, and only two years between Chapter 13 discharges. These rules mean that someone who received a Chapter 7 discharge a few years ago may be barred from another Chapter 7 today but could still get relief through Chapter 13. If you have filed before, the timing of your prior case can effectively decide which chapter is available to you now, so it is worth confirming the dates with an attorney.
How to decide between the two chapters
- Complete the required pre-filing credit-counseling briefing and gather your income records.
- Run the means test using your six-month average income against the current California median for your household size.
- Inventory your property and identify anything that is not fully protected by an exemption.
- List your debts and separate dischargeable unsecured debt from secured debt and from arrears you need to cure (like a mortgage default).
- If you pass the means test and have no nonexempt property or arrears to address, consider Chapter 7.
- If you are over-median, want to save a home from foreclosure, or need to protect nonexempt assets, consider Chapter 13.
- Compare the cost, timeline, and outcome of each chapter for your facts — ideally with a California bankruptcy attorney.
- File the chapter that protects the most of what you own while giving you the relief you need.
Frequently asked questions
Can I switch from Chapter 13 to Chapter 7 later?
Often, yes. Filers sometimes start in Chapter 13 and later “convert” to Chapter 7 if their income drops or the plan becomes unaffordable, provided they qualify. Conversion has its own rules and consequences, so get advice before doing it.
Which chapter is cheaper?
Chapter 7 generally costs less overall because it ends in about four months and requires no multi-year plan. The recent court filing fee is around $338 for Chapter 7 and $313 for Chapter 13, but Chapter 13 attorney fees are usually higher and are often paid through the plan.
Does Chapter 13 hurt my credit less than Chapter 7?
Both appear on your credit report, but for different lengths of time — a Chapter 7 can remain up to ten years and a completed Chapter 13 typically up to seven. The practical impact depends more on your overall credit behavior than on which chapter you filed.
Can Chapter 13 stop a foreclosure?
Yes. Filing triggers the automatic stay, which halts a pending foreclosure sale, and the Chapter 13 plan then lets you cure the missed mortgage payments over time while staying current going forward — something Chapter 7 cannot do.
What if I do not qualify for Chapter 7?
If your income is too high to pass the means test, Chapter 13 is usually the path forward. It does not have the same income ceiling; instead, your income determines your plan length and payment.
Find a California bankruptcy attorney
Choosing between Chapter 7 and Chapter 13 turns on your income, your property, your debts, and your goals — details that deserve a careful look. Our directory connects you with attorneys licensed by the State Bar of California who handle consumer bankruptcy across all 58 counties and all four federal districts. Browsing and reaching out is free and carries no obligation. To understand the bigger picture, start with our overview of bankruptcy in California, and to see exactly how the income limits work, read our guide to the California means test.