Chapters 7, 13 have a number of differences

When it comes to personal bankruptcy, it’s all in the numbers: Chapters 7 and 13 of the U.S. Bankruptcy Code are the government-designed refuge for those buried in debt.

Chapter 7, also known as a liquidation bankruptcy, wipes out most debts but requires the petitioner to pass a complex “means test” to determine whether the person really can’t pay.

The court trustee can seize some belongings for sale to pay off creditors after a filing. In practice, few homes are seized in California because the borrowers often owe more than the houses are worth and selling them won’t bring the creditors any money.

You’ll still be on the hook for past-due and future mortgage payments if you want to keep your home. And although a Chapter 7 filing halts foreclosure, it’s only temporary. Then you have to make up past payments or come to some kind of arrangement with the lender.


Chapter 13, sometimes called a wage-earners bankruptcy, is more complicated than Chapter 7 and often requires a lawyer’s help. Instead of wiping out debts, it usually lowers them and gives you a longer time to pay them off -- three or five years, depending on the circumstances.

This type of bankruptcy allows you to hold on to your property, if successfully completed. But it doesn’t lower the principal owed on your home.

No matter which bankruptcy chapter you choose, some debts will still be owed in full. These include criminal fines, civil judgments, student loans and back-owed child support and alimony.

A Chapter 7 or Chapter 13 bankruptcy filing will stay on your credit report for about 10 years. This will probably make it difficult to get credit, and might even make it tougher to get a job, for at least the first few years after the filing.