Under Chapter 13, a debtor is ineligible if secured or unsecured debt exceeds debt limits. You need quick relief from creditors. If so, you must decide whether to file for Chapter 7 or Chapter 13 bankruptcy. It is fairly common for people who submit a petition for Chapter 7 to be required to file for Chapter 13 instead. If a debtor cannot afford to repay creditors for three or five years in a Chapter 13 plan, it may be best to file for Chapter 7 (if qualified). Once you file under Chapter 7, the court will appoint a trustee, who will sell off your unprotected or non-exempt assets to pay off your creditors. How Chapter 7 Bankruptcy Works. Unlike Chapter 13 bankruptcy, Chapter 7 bankruptcy rules do not impose a limit on the amount of debt a filer may have. Basics: In Chapter 13 bankruptcy, you repay your creditors (some in full, some in part) through a Chapter 13 repayment plan. The same study found that individuals who used Chapter 13 bankruptcy didn’t have as much success, but more had their debt discharged (166,424) than didn’t (164,626). Chapter 7 Vs. Chapter 13: Which Should You File? A 2016 study by the American Bankruptcy Institute found that nearly 500,000 people filed for Chapter 7 bankruptcy and 95.5% of them had their debts discharged. While you may want to file under Chapter 7, you may not be eligible for a Chapter 7 bankruptcy discharge. This usually happens if you fail the means test, or if you have a sufficient amount of income to pay off at least some of your debt. If your net income is lower, then you qualify for filing under Chapter 7; otherwise, you may have to file under Chapter 13. Reasons to File for Chapter 7. No repayment plan. Chapter 7, Chapter 11 and Chapter 13 bankruptcies all impact your credit, and not all your debts may be wiped out. Your first step should be contacting a professional to help you determine whether Chapter 7 or Chapter 13 is right for you. And then read about the pros and cons of Chapter 7 and Chapter 13, and which works best in various situations. That means they walked away debt free. Likewise, you may prefer a Chapter 13 bankruptcy to protect property from being sold off; however, you may not have the steady income needed to fund a Chapter 13 repayment plan. The trustee will try to sell any significant nonexempt property in order to repay your creditors. Start by learning about the key differences between the two types of bankruptcy, including when you qualify for one and not the other. Chapter 13 bankruptcy eliminates qualified debt through a repayment plan over a three- or five-year period. Chapter 7 bankruptcy is appropriate when the following circumstances apply: You are unable to repay debt in a repayment plan. Chapter 7 Bankruptcy: Chapter 13 Bankruptcy: Basics: A Chapter 7 bankruptcy will discharge most types of unsecured debt. Wondering whether Chapter 7 or Chapter 13 bankruptcy is better in your situation? And of course, you must refer to the limits above to see if Chapter 7 is even a possibility. In this case, the court requires that you file for Chapter 13 and at least attempt to repay your debts.