Quick overview — which bankruptcy option fits you?
If you live in Los Angeles and are weighing bankruptcy, the basic choice most consumers face is between Chapter 7 (liquidation) and Chapter 13 (repayment plan). Chapter 7 typically lets eligible individuals discharge many unsecured debts after nonexempt assets are liquidated. Chapter 13 lets individuals with regular income keep property and repay creditors over a court-approved 3–5 year plan.
This article explains the main differences, California-specific exemption issues that matter in Los Angeles, practical decision steps, and what to expect at filing and during the case.
Head-to-head: core differences (plain-English)
Below are the most important differences to understand before you decide.
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Basic idea | Liquidation of nonexempt assets; discharge of many unsecured debts. | Repayment plan based on disposable income; keep property while paying creditors over 3–5 years. |
| Who can file | Individuals who pass the federal means test (income and allowable expenses determine eligibility). | Individuals with regular income and debt under statutory limits may file (designed for wage-earners). |
| Length | Generally a few months from filing to discharge (after liquidation and trustee process). | Plan duration is usually 3 years if below median income, or 5 years if above — never more than 5 years. |
| What you keep | Exempt property only — California exemptions decide what you can retain. | You generally keep your property if you keep up with plan payments; secured debts may be cured or reorganized through the plan. |
| Effect on co-signers | Co-signers remain liable unless creditor agrees otherwise. | Chapter 13 can offer stronger protection for co-debtors on consumer debt while plan is in effect. |
These differences matter most for homeowners, car owners, and anyone with non-dischargeable debts (certain student loans, recent taxes, child support, and some fines).
California and Los Angeles specifics — exemptions, homestead, and why they change the choice
California allows debtors to choose between two exemption schemes; your choice can determine whether Chapter 7 risks losing your home or a vehicle. Under California law, the homestead exemption (used instead of the §703 wildcard exemptions) is calculated using a countywide median sale price formula and statutory floors/ceilings; the statute was amended and now adjusts annually (amendments effective in 2025 are reflected in the code). In short, the homestead exemption can range widely and may be much larger than the wildcard amounts, depending on the county and recent adjustments.
Practical effect in Los Angeles County: if your home equity is covered by the homestead exemption you may safely file Chapter 7 without losing the house; if not, Chapter 13 may let you keep the home by curing arrears through a plan. Because exemption amounts and indexing can change, check the current local homestead number before deciding.
How to decide — pragmatic steps for Los Angeles debtors
- Gather basics. Total your unsecured vs secured debt, monthly income and necessary expenses, recent pay stubs and tax returns, and equity in your home or vehicle.
- Run the federal means test. If your household income is over the median for California, Chapter 7 may be unavailable — the means test is required and will push some debtors toward Chapter 13.
- Check California exemptions. Compare the §704 homestead option vs §703 wildcard/exemption schedule to see how much equity you can protect. If homestead protects your equity, Chapter 7 may be viable; if not, Chapter 13 can allow you to keep the property by paying arrears.
- Estimate timeline and costs. Chapter 7 is usually faster and lower-cost overall; Chapter 13 requires plan payments and trustee fees for 3–5 years. Courts and trustees in Los Angeles follow the federal rules and local practice, so expect a 341 meeting and trustee oversight in both chapters.
- Get local advice. Consult a bankruptcy attorney (or a free clinic) before filing — decisions about exemptions, reaffirmation agreements, and mortgage arrears can have long-term consequences.
Note on prevalence: Chapter 7 remains the most commonly filed consumer chapter nationally, while Chapter 13 is the primary tool for debtors who can repay through a plan. Recent data through 2024 show Chapter 7 is the largest share of consumer filings.
If you’re facing foreclosure
Chapter 13 can be especially useful to stop a foreclosure and repurchase missed mortgage payments over the plan term, but you must keep current post‑petition mortgage payments. Chapter 7 stops most collections and can delay foreclosure temporarily but usually does not give the same cure option.
Final checklist before filing
- Complete mandatory pre‑filing credit counseling certificate (required for both chapters).
- Decide whether to use federal or California exemptions and document property values.
- Prepare to attend the 341 meeting of creditors and provide trustee requested documents.
- Understand which debts are not dischargeable (child support, many taxes, recent student loans except in rare hardship discharges).
When in doubt, seek a Los Angeles bankruptcy attorney or reputable nonprofit counselor to run the numbers and explain tradeoffs for your exact situation.