Chapter 7 vs. Chapter 13 in Pennsylvania

Most Pennsylvania filers are choosing between two chapters, and neither one is automatically better. Chapter 7 is faster and cheaper; Chapter 13 buys time and protects things Chapter 7 cannot. The right answer depends on your income, your equity, and whether you are behind on secured debt.

Eligibility. Chapter 7 requires passing the means test under 11 U.S.C. § 707(b): either your household income is below the Pennsylvania median for your household size, or you pass the long-form calculation after allowed expense deductions. Chapter 13 has no income ceiling, but it does have debt limits under 11 U.S.C. § 109(e), and you need regular income sufficient to fund a plan.

Speed. Chapter 7 typically runs 90 to 120 days from filing to discharge. Chapter 13 is a court-supervised plan lasting three years (if you are below median) or five years (if you are above median) before discharge under 11 U.S.C. § 1328. That is a real difference in how long you live under court supervision.

Your house. Chapter 7 does not cure mortgage arrears. If you are behind and the lender wants the house, Chapter 7 delays the sheriff sale but does not fix the default. Chapter 13 is the tool that cures arrears — you repay the past-due amount through the plan while resuming regular payments, and the lender cannot foreclose while you perform.

Your equity. Chapter 7 is a liquidation: whatever equity your exemptions do not cover is available to the trustee, who can sell the asset. If you have substantial non-exempt equity in a home, a paid-off vehicle, or a rental property, Chapter 13 lets you keep it by paying unsecured creditors at least the value of that non-exempt equity over the plan.

Your car. Chapter 7 lets you keep a financed car if you are current and reaffirm or stay current. Chapter 13 can cure a repossession-eligible arrearage and, in some cases where the loan is more than 910 days old, reduce the secured claim to the vehicle's value under 11 U.S.C. § 1325(a)(5).

Credit report. A Chapter 7 stays on your report up to 10 years; a Chapter 13 up to 7 years. That gap matters less than most people expect, because scoring recovery is driven mostly by debt-to-income and new on-time payment history — but if the two chapters are otherwise a close call, it is a legitimate point in Chapter 13's favor.

Cost. Chapter 7 attorney fees are paid before filing and are lower. Chapter 13 fees are higher but are largely paid through the plan, so the out-of-pocket amount to get filed is often smaller — which is why some people who could qualify for Chapter 7 still choose Chapter 13.

When Chapter 7 is the better fit: mostly unsecured debt, income below or near the PA median, current on (or willing to surrender) your house and car, and little non-exempt equity.

When Chapter 13 is the better fit: mortgage arrears you want to cure, above-median income, non-exempt equity you want to protect, priority tax debt you need to pay over time, a co-signer you want shielded by the co-debtor stay under 11 U.S.C. § 1301, or a prior Chapter 7 discharge that is too recent to repeat.