Short answer
Which chapter you can use is decided by arithmetic, not by preference, and the first number is your state’s median family income for your household size. There is no national threshold: a single filer qualifies for Chapter 7 below $53,978 in Mississippi and below $88,202 in Massachusetts (US Trustee Program). Before any of that, two things are worth knowing. Bankruptcy does not discharge child support, alimony, most taxes or government-backed student loans (US Courts). And retirement savings are largely protected, so withdrawing them to pay debts that bankruptcy would erase is the most expensive mistake available here.
The numbers that decide it
- 581,570 personal bankruptcies were filed in the twelve months to 30 June 2026, out of 608,511 total, split 382,161 Chapter 7 and 215,490 Chapter 13 (US Courts).
- The Chapter 7 means test compares your income to your state’s median family income for your household size, with $11,100 added for each person above four (UST). No national figure applies.
- Filing fees are $338 for Chapter 7 and $313 for Chapter 13 (US Bankruptcy Court).
- Chapter 13 requires unsecured debts under $526,700 and secured debts under $1,580,125 at the filing date (US Courts).
- A Chapter 13 plan runs three years if your income is below the state median and generally five if above, and never longer than five (US Courts).
- Credit counselling from an approved agency is required within 180 days before filing, without which you cannot be a debtor under any chapter (US Courts).
- A bankruptcy can be reported for up to ten years, against seven for most other negative items (CFPB).
- The exemption cap for IRAs is $1,711,975, effective 1 April 2025 (NCLC). Retirement savings are well protected but not without limit, which is the opposite of what most summaries say.
The means test, which has no national number
Whether you may file Chapter 7 turns first on whether your current monthly income, annualised, falls below the median family income for your state and household size. Those figures are published by the US Trustee Program and updated periodically; the table in force applies to cases filed on or after 15 July 2026 (UST).
The spread between states is the part that surprises people, and it is large enough to change the answer for the same household.
| State | Household of 1 | Household of 4 |
|---|---|---|
| Mississippi | $53,978 | $97,464 |
| Alabama | $64,321 | $106,740 |
| Massachusetts | $88,202 | $178,524 |
Add $11,100 for each person beyond four (UST). A single filer earning $70,000 is over the line in Mississippi and under it in Massachusetts, on identical income. That is why any article quoting one national means-test figure is describing something that does not exist, and why the only useful version of this check is your own state’s row.
Being above the median is not the end of Chapter 7. It moves you to the second part of the test, which subtracts allowed expenses from income, and a household with high secured debt or medical costs can still qualify. It does mean the calculation stops being arithmetic you can do in your head.
What the two chapters actually do
Chapter 7 discharges qualifying debts and can be over in a few months. Chapter 13 reorganises them into a court-supervised plan you pay for three or five years, after which the remaining qualifying balance is discharged.
The choice is usually made for you. If you are below the state median you can generally choose; above it, Chapter 7 requires passing the expense-based part of the means test. Chapter 13 has its own gate: unsecured debts under $526,700 and secured debts under $1,580,125 at the filing date (US Courts). And the plan length is set by the same median comparison, three years below and generally five above, never more than five (US Courts).
The practical difference people miss is what each does to a house or a car. Chapter 7 discharges personal liability but does not by itself stop a secured creditor from taking the collateral for missed payments. Chapter 13 exists largely to let someone catch up arrears over the life of the plan while keeping the asset. If keeping a specific thing is the point, that usually decides the chapter before the means test does.
The two chapters side by side
Set out together, the differences that actually decide the choice are few.
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Court filing fee | $338 | $313 (US Bankruptcy Court) |
| Debt eligibility limits | None stated; the means test governs | Unsecured under $526,700, secured under $1,580,125 (US Courts) |
| How long it runs | Months | 3 years below the state median, generally 5 above, never more than 5 (US Courts) |
| Effect on a secured asset | Discharges personal liability, not the lien | Lets you cure arrears over the plan while keeping the asset |
| Credit counselling | Required within 180 days before filing, for either chapter (US Courts) | |
Read the fourth row first if there is a house or a car you intend to keep, because it decides the chapter more often than the means test does.
What to try first, and what not to
Bankruptcy is a legal remedy with real costs, and some debts respond to cheaper measures. Negotiating directly with creditors, a hardship programme from a lender, or a non-profit credit counselling agency’s debt management plan are all worth exhausting before filing, and none of them carries a ten-year reporting entry.
Two things are worth being warier of. For-profit debt settlement typically requires you to stop paying creditors while funds accumulate, which damages credit and invites lawsuits during the waiting period, and forgiven debt can be taxable income. And borrowing against a house to clear unsecured debt converts debt that bankruptcy could discharge into debt secured on your home, which it cannot. Both are the same error in different clothes: paying a high price to avoid a filing that may still happen.
The honest test is arithmetic rather than principle. If a realistic repayment plan clears the balance in a few years without missing essentials, the alternatives are better. If it does not, the alternatives mostly convert money into delay.
What bankruptcy does not erase
The list is short, specific, and where most disappointment comes from. Chapter 7 does not discharge alimony or child support, certain taxes, educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury, debts for death or personal injury caused by driving while intoxicated, or certain criminal restitution orders (US Courts).
Two of those are worth expanding. Government-backed student loans are not discharged in the ordinary course, and the exceptions require a separate proceeding rather than arriving automatically with the discharge. And debts arising from fraud or false pretences may be discharged unless a creditor objects and succeeds, which means the outcome depends on whether anyone contests it rather than on the category alone.
What you keep
Exemptions decide what survives, and they are the part of bankruptcy that varies most by where you live: some states require you to use their exemption list, others let you choose between the state list and the federal one. That makes any national statement about equity in a home or a car unreliable.
Retirement savings are the clear exception, and the usual summary overstates them. The exemption cap for IRAs is $1,711,975, effective 1 April 2025 (NCLC), and employer-sponsored plans are protected on a different footing. The practical upshot is unchanged for almost everyone: the accounts are protected far beyond the balances most filers hold, and cashing them in to pay debts that bankruptcy would discharge converts protected money into a tax bill and an early-withdrawal penalty for nothing. But "unlimited" is not accurate, and a filer near that cap needs advice rather than a rule of thumb.
Afterwards, and the ten-year number
A bankruptcy can be reported for up to ten years, where most other negative information is limited to seven (CFPB). Two things about that are usually misunderstood.
The ten years is a maximum reporting period, not a sentence: the effect on a credit score is heaviest at the start and diminishes well before the entry falls off, because scoring weighs recent behaviour more heavily than old events. And the accounts discharged in the bankruptcy stop accruing new delinquencies, which is often the larger effect in the first year, since a file full of continuing late payments is worse than a closed one.
What follows is ordinary: a small secured credit line used lightly and paid in full, every payment on time, and time. Anyone quoting a specific score at a specific month is describing an assumption rather than a finding.
The mistakes that cost the most
Draining retirement savings first. Those funds are largely protected in bankruptcy (NCLC). Withdrawing them to pay dischargeable debt spends protected money, triggers tax, and usually delays the filing rather than avoiding it.
Assuming a national means-test figure. The threshold is your state’s median for your household size, and the range across states is wide enough to reverse the answer (UST).
Expecting student loans to go. Government-backed loans are not discharged in the ordinary course (US Courts).
Skipping the credit counselling. It is required within 180 days before filing and without it you cannot be a debtor under any chapter (US Courts).
Filing Chapter 7 to save a house. Chapter 7 discharges the personal liability, not the lien. Chapter 13 is the chapter built for curing arrears on something you want to keep (US Courts).
Go deeper
- The bankruptcy decision engine, for your own figures.
- Medical debt and bankruptcy, where the causation claim is examined properly.
- Debt management during a crisis, for the alternatives worth trying first.
- Credit score protection, for the rebuilding afterwards.
- The debt triage tool, for ordering what gets paid while you decide.
Common questions
How many people file? 581,570 personal filings in the twelve months to 30 June 2026, of 608,511 in total (US Courts).
Do I qualify for Chapter 7? The first test is whether your annualised current monthly income is below your state’s median for your household size (UST). Above it, an expense-based calculation decides.
What does it cost to file? $338 for Chapter 7 and $313 for Chapter 13 in court fees (US Bankruptcy Court), before any attorney fee, which varies by district and by the complexity of the case.
Will I lose my retirement savings? Almost certainly not. The IRA exemption cap is $1,711,975 (NCLC), well above the balances most filers hold.
How long does it stay on my credit report? Up to ten years, against seven for most other negative items (CFPB).
Sources
Every figure links to the body that publishes it. Where a threshold is set state by state, as the means test is, this page gives the range and the source table rather than a national number that does not exist.
- Filing volumes: US Courts bankruptcy filing statistics.
- Means test median income table: UST median family income table.
- Chapter 7 and Chapter 13 rules: Chapter 7 Bankruptcy Basics and Chapter 13 Bankruptcy Basics.
- Court filing fees: bankruptcy court filing fees.
- Credit reporting periods: CFPB on credit report retention.
- Exemption dollar amounts: NCLC on the April 2025 exemption adjustments.