Key Differences Between Chapter 7 and Chapter 13 Bankruptcy

Salt Lake City bankruptcy attorney

Filing for bankruptcy can be an emotionally tumultuous and stressful experience. During difficult financial times, however, opting to declare bankruptcy may be your best bet as getting a fresh start. Declaring personal bankruptcy is a process that is wrapped in red tape and involves a ton of math and stacks of paperwork, and it can be confusing to know which form of bankruptcy is the right choice for you. The differences between Chapter 7 and Chapter 13 bankruptcy are outlined here so you can learn more about which option best suits your situation.

Repayment of prior debts

When Chapter 7 bankruptcy is filed, you are essentially asking that your debts be written off due to lack of means to repay them. However, when Chapter 13 bankruptcy is filed, you are making an arrangement with your debtors to repay a lower amount than the current amount owed to them or asking for a longer period of time to repay the current amount owed. In short, Chapter 7 means no repayment will be made while Chapter 13 reduces the amount repaid or increases the amount of time in which repayment is permitted.

Income and debt amounts

In order to file for Chapter 7 bankruptcy, certain personal financial conditions have to be met—and these conditions are more strict than those that apply to Chapter 13 bankruptcy. A “means test” is taken before filing for Chapter 7 bankruptcy. This test calculates the amount of income the person who is filing has and also takes into account the median income for the area they live in, as well as amounts owed on debts. If a person is deemed to have the means to repay debts, Chapter 7 is no longer an option on the table and Chapter 13 bankruptcy must be filed instead.


Typically when filing bankruptcy, all of the filing party’s assets are liquidated. However, for both Chapter 7 and Chapter 13 bankruptcy, there are exceptions to this rule. The role the exemptions play in each type of bankruptcy differs.

  • Chapter 7 exemptions
  • For Chapter 7, property and expense exemptions determine which types of assets the filing party can keep ownership of, usually a home and/or one to two vehicles. The allowable value of these assets is determined by data obtained from tables published by the Department of Justice.

  • Chapter 13 exemptions
  • On the other hand, when filing for Chapter 13 bankruptcy, although the asset exemptions may be the same as with Chapter 7, the role of the exemptions is different. Instead of determining which assets the filing party may keep ownership of, the exemptions determine the amount of the debts the filing party must repay to the parties they owe money to.

You don’t have to file for bankruptcy alone

If you are considering filing for bankruptcy, whether you plan to file for Chapter 7 or Chapter 13, contact a bankruptcy attorney in Salt Lake City to get assistance with navigating the bankruptcy filing process. The staff at Justin M. Myers, Attorney at Law LLC have the experience and expertise to help you with your bankruptcy case, so contact them today to find out more about your options under Utah bankruptcy law.

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