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The Differences of Chapter 7 vs. Chapter 13 Bankruptcy in California

Have you researched your options with your debt, and find yourself at the point where you are thinking you need to file for chapter 7 or chapter 13 bankruptcy in California? You may be deciding which chapter you would file under and why as there are many options, and it can be overwhelming and confusing.  The decision of whether to file chapter 7 vs. chapter 13 bankruptcy needs to be carefully considered. Below is our  quick guide to help describe the differences between the Chapter 7 and 13.


Chapter 7 Bankruptcy

Chapter 13 Bankruptcy

Is a credit counseling program required?



How do I know if I qualify?

Debtors must pass the California Chapter 7 bankruptcy “means test” among other criteria in order to qualify

Must have debts less than a certain amount set by California law which adjusted periodically. Currently it is $360,475 in unsecured debts and $1,081,400 in secured debts.

How will filing bankruptcy affect my debt? 

With some exceptions (i.e. student loans, taxes, child support), the majority of debts are extinguished upon conclusion of bankruptcy.

Your entire debt is paid off over a period of time under a court-approved payment plan, which can last up to 5 years.

How will filing bankruptcy affect my home?

You may be able to keep your home under homestead exemption, provided you remain current on mortgage payments.

May be able to keep home so long as you comply to the payment plan and you don’t have any substantial non-exempt equity.

How will filing bankruptcy affect my vehicle(s)?

This depends as California restricts the amount of “equity” you have in your car to a very low amount. You may be forced to liquidate your car or return it to the lender.

Most debtors can keep their vehicles, but must be able to make payments under the payment plan over 3-5 years.

How will it affect my non-exempt assets? 

All non-exempt assets are liquidated or auctioned off to pay creditors.

You can keep most assets, so long as debtor sticks to payment plan.  If debtor falls behind in payment plan, assets could be liquidated.

How much time will I have to repay my debt? 


Typically three to five years.

What will the payments on my remaining debt look like? 

Non-dischargeable debt, such as most student loans, child support and taxes, will still have to be paid in full.

“Reasonable” payments must be paid on all debts. Will vary depending on individual’s disposable income.

What portion of my debt will have to be repaid? 

Will depend on the value of non-exempt assets surrendered to pay off debts.

In some instances, total amount of debt to be paid back may be reduced.

When will bankruptcy proceedings end? 

Court enters discharge order.  Entire process usually takes 3-6 months.

Debtor has made all payments in accordance with payment plan and court has entered discharge order.  Could take up to 5 years to complete the plan.

What will filing bankruptcy affect my credit rating? 

Fact that you filed remains on credit report for up to ten years from date of filing.

Fact that you filed remains on credit report for up to ten years from date of filing.  However, some credit reporting agencies will only report a Chapter 13 for seven years.


Options to Filing Bankruptcy in California

If you don’t qualify for Chapter 7 or Chapter 13 bankruptcy, there are other viable options to filing bankruptcy.  An attorney negotiated debt settlement is a great alternative to eliminate debt without the need to file bankruptcy.  Debt Settlement is usually much quicker and less expensive than a Chapter 13 bankruptcy and if you don’t qualify for Chapter 7, not to mention the potential credit score impact, you may consider an attorney negotiated debt settlement instead. Call us now or complete our free form, to obtain a free debt consultation in one of our local California offices.