Chapter 7 or Chapter 13: Which One Do I Need?

People often arrive having decided they want Chapter 7 because they have heard it is faster and cheaper. Both of those things are true. But the choice is less a preference than a diagnosis, and it usually turns on two questions.

Question one: what is your income?

Chapter 7 has an income qualification called the means test. In broad terms, it compares your household income over the past six months against the median income for a Nevada household of your size. Come in below it and you generally qualify. Come in above it, and a second calculation looks at your actual expenses to determine whether you have meaningful disposable income left over.

If that calculation shows you could pay a reasonable portion of your debts, Chapter 7 is off the table and Chapter 13 is the route.

The test is more forgiving than people expect, and the six-month lookback matters. Someone who recently lost income may qualify in two months when they did not qualify today. That timing is worth discussing before you assume the answer.

Question two: are you behind on something you want to keep?

This is where most cases are actually decided.

Chapter 7 eliminates what you owe. It does not cure arrears and it does not remove liens. If you are three payments behind on a mortgage or a car and you want to keep that property, Chapter 7 pauses the lender through the automatic stay but leaves the past-due balance intact when the case closes.

Chapter 13 is built for exactly this. It puts you into a court-supervised repayment plan running three to five years, and the arrears get folded into it. You catch up gradually while the lender is required to stand down. That is the mechanism that saves houses.

So, roughly

• Chapter 7 fits if your income is below the threshold, your debt is mostly unsecured — credit cards, medical bills, personal loans — and you are either current on secured property or willing to let it go.

  
  

• Chapter 13 fits if your income is too high for Chapter 7, or you are behind on a mortgage or vehicle you intend to keep, or you have assets whose equity exceeds what the exemptions protect.

  
  

What each one actually costs you

Chapter 7 typically closes about four to six months after filing. You attend one short meeting with the trustee, and then the discharge is entered. It is the shorter and less expensive route.

Chapter 13 runs three to five years and involves a monthly plan payment throughout. The discharge comes at the end. It asks considerably more of you — but it can do things Chapter 7 cannot.

It is not always a permanent decision

Cases can be converted. A Chapter 13 that becomes unaffordable because of a job loss can, in the right circumstances, be converted to Chapter 7. A Chapter 7 case can convert the other direction. This is not a lever to pull casually, but it is worth knowing the first choice is not necessarily the last word.

How the answer actually gets reached

It comes from four things: six months of income, a list of what you owe and to whom, what you own and what it is worth, and what you are trying to protect. With those, the chapter is usually obvious within about twenty minutes.

Sometimes the answer is that neither one is right for you. That is worth finding out from someone who is willing to say so.

Bring us those four things and we will tell you which chapter fits. The consultation is free, by phone or video call. Call 702-386-8600.