Chapter 7 vs. Chapter 13 in New York: 2026 Filing Guide

If you are comparing Chapter 7 vs Chapter 13 in New York for 2026, you are not alone. Thousands of New Yorkers face this exact decision every year, and the stakes are real. The wrong choice can cost you your home, your savings, or months of unnecessary struggle. The right choice can give you a genuine, fresh start. This guide walks you through the updated means test figures, the latest exemption thresholds, and the practical differences between the two chapters, so you can approach your next step with clarity and confidence.

What Is the Core Difference Between Chapter 7 and Chapter 13 Bankruptcy in New York?

Both chapters exist under the federal Bankruptcy Code, but they work in very different ways.

Chapter 7 is a liquidation bankruptcy. It wipes out qualifying unsecured debts, such as credit card balances and medical bills, usually within three to five months. A court-appointed trustee reviews your assets and, in most cases, New York filers keep everything they own because their property falls within the state's generous exemption limits.

Chapter 13 is a reorganization bankruptcy. Instead of eliminating debt immediately, it creates a structured repayment plan that lasts three to five years. You pay back a portion of what you owe each month, and the remaining eligible debt is discharged at the end of the plan.

The choice between the two depends on your income, the type of debt you carry, whether you own significant property, and whether you need to save a home from foreclosure. These are not questions with one-size-fits-all answers. Each person's situation is unique, and getting it right from the beginning matters.

The 2026 New York Means Test: Does Your Income Qualify You for Chapter 7?

Before you can file Chapter 7, you must pass the means test. This is a calculation that compares your household income to the New York state median income for your family size.

For cases filed on or after April 1, 2026, the official median income thresholds published by the U.S. Bankruptcy Court for the Eastern District of New York are as follows:

• 1 person: $73,272

• 2 people: $92,902

• 3 people: $115,579

• 4 people: $139,040

• For each additional member beyond 4, add $11,100

If your average monthly income over the past six months falls below these figures, you pass Part 1 of the means test, and you are likely eligible to file Chapter 7. If your income is above the threshold, you move to Part 2 of the test, which weighs your allowable expenses against your income to calculate your disposable income. You may still qualify for Chapter 7 even above the median if your necessary expenses leave little or nothing left over each month.

Chapter 13 does not use a means test for eligibility. However, if your income is above the state median, the law generally requires a five-year repayment plan rather than three years. Your income level also determines how much you must pay into that plan each month.

Always verify current figures directly through the U.S. Trustee Program means testing page.

New York Bankruptcy Exemptions in 2026: What Property Can You Keep?

One of the most important things New Yorkers need to understand is that they have a choice between New York state exemptions and federal bankruptcy exemptions. You must pick one complete set. You cannot mix and match.

The New York Homestead Exemption

For homeowners, the homestead exemption is often the most critical protection. Under current New York law, the homestead exemption protects the following amounts of equity in your primary residence:

• Up to approximately $179,975 in equity for residents of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam counties

• A lower amount applies to residents of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties

• A still lower amount applies to all remaining upstate counties

Married couples who jointly own their home may double these amounts in many circumstances. If your home equity falls within the applicable exemption limit, a Chapter 7 trustee generally cannot sell your home to pay creditors.

In Chapter 13, you can keep your home regardless of how much equity you have, as long as your repayment plan compensates creditors at least as much as they would have received in a Chapter 7 liquidation. This is why Chapter 13 is often the more protective option for homeowners with significant equity or for those whose homes are at risk of foreclosure.

Federal Exemptions: When They May Be Better

The federal homestead exemption is $31,575 per person as of cases filed in 2026. Married couples filing jointly can double that to $63,150. While lower than New York's exemption for most homeowners, the federal exemption includes a powerful wildcard provision of up to $17,475 that can protect any property of your choosing. For renters or people with little home equity but other assets to protect, the federal set may offer more overall coverage.

Chapter 13 Debt Limits for 2026: Do You Qualify?

Chapter 13 is not available to everyone. To file under Chapter 13, your debts must fall below specific dollar thresholds set by federal law.

For cases filed between April 1, 2025, and March 31, 2028, the current Chapter 13 debt limits are:

• Secured debt (mortgages, car loans): $1,580,125

• Unsecured debt (credit cards, medical bills): $526,700

These are separate limits. Your secured debt must not exceed its ceiling, and your unsecured debt must not exceed its own ceiling. You cannot combine them. If your debts exceed either limit, Chapter 13 is not available, and you would need to explore Chapter 11 instead.

This is particularly relevant for homeowners on Long Island and in New York City. Rising property values in Nassau County, Suffolk County, and the five boroughs mean some homeowners carry mortgage balances that push them close to or beyond the secured debt ceiling. A skilled bankruptcy attorney can analyze how your debts are classified and whether you fall within the qualifying limits.

A bipartisan Senate bill, the Bankruptcy Threshold Adjustment Act of 2026 (S. 3977), would raise the Chapter 13 debt limit to a single combined $2,750,000. As of early 2026, the bill advanced to the Senate floor calendar, but it had not yet been signed into law. If this legislation passes, significantly more New Yorkers could become eligible for Chapter 13 relief. Speak with an attorney to understand how any pending changes may affect your specific situation.

Saving Your Home: Why Chapter 13 Often Wins for Foreclosure Defense in New York

If you are behind on your mortgage and facing foreclosure, Chapter 13 offers something Chapter 7 generally cannot: a structured path to catch up on missed payments while keeping your home.

When you file for bankruptcy, an automatic stay goes into effect immediately. This legally stops foreclosure proceedings, collection calls, wage garnishments, and lawsuits. Under Chapter 7, this relief is temporary and does not give you a mechanism to cure mortgage arrears. Under Chapter 13, you can spread the overdue amount across your entire three to five year repayment plan and resume making regular mortgage payments going forward.

Chapter 7 can actually put your home at greater risk if you are behind on payments and cannot quickly bring the account current. Courts in the Eastern District of New York, which covers Nassau and Suffolk counties, take the feasibility of Chapter 13 plans seriously. Your plan must demonstrate that you have a reliable income to make regular payments and that creditors will receive at least as much as they would under a Chapter 7 liquidation.

This is one area where working with an experienced local attorney makes a real difference. The procedural requirements in the Eastern and Southern Districts of New York are specific, and a plan that fails to meet confirmation standards can be dismissed.

How Long Does Each Chapter Take? Timeline Comparison for New York Filers

Understanding the timeline is just as important as understanding the legal differences.

Chapter 7 Timeline in New York

Most Chapter 7 cases in the Eastern District of New York resolve within four to six months from filing to discharge. The basic steps are:

1. Complete credit counseling from an approved provider within 180 days before filing

2. File your petition, schedules, and means test forms with the bankruptcy court

3. Attend a 341 meeting of creditors, typically 30 to 45 days after filing

4. Complete a financial management course

5. Receive your discharge, usually 60 to 90 days after the 341 meeting

A Chapter 7 bankruptcy stays on your credit report for 10 years from the filing date.

Chapter 13 Timeline in New York

Chapter 13 is a much longer commitment. The basic steps are:

1. Complete credit counseling and file your petition with a proposed repayment plan

2. Begin making plan payments within 30 days of filing

3. Attend the 341 meeting of creditors

4. Attend a plan confirmation hearing, typically 45 to 60 days after the 341 meeting

5. Make all required plan payments for 36 to 60 months

6. Complete a financial management course and receive your discharge

A Chapter 13 bankruptcy stays on your credit report for 7 years from the filing date, which is a meaningful advantage over Chapter 7 for those who want to rebuild credit sooner.

Which Chapter Is Right for You? Key Factors for New York Residents

There is no universal answer. The right chapter depends on your specific financial picture. That said, certain patterns do emerge for New Yorkers in Nassau County, Suffolk County, Manhattan, Brooklyn, and Queens.

Chapter 7 tends to be the better fit when you have limited income, your earnings fall below the New York median for your household size, your debts are primarily unsecured credit cards and medical bills, and you do not own significant property beyond what the exemptions cover.

Chapter 13 tends to be the better fit when you earn enough to fund a repayment plan, you are behind on your mortgage and want to stop a foreclosure, you own assets that could be seized in Chapter 7 but fall outside the exemption limits, or your income is above the means test threshold and you cannot qualify for Chapter 7.

Some people assume bankruptcy means losing everything. In our experience, the opposite is often true. New York's exemption laws are among the most protective in the country, and the right filing strategy can preserve your home, your car, and your retirement accounts while giving you real relief from crushing debt.

Ready to Find Out Which Chapter Protects You Best? Contact Kamini Fox, PLLC, today.

Choosing between Chapter 7 and Chapter 13 is one of the most important financial decisions you will make. It affects your home, your credit, your assets, and your future. You should not try to navigate it alone, and you certainly should not rely on general information to make a decision with this much at stake.

At Kamini Fox, PLLC, we have over 20 years of hands-on experience helping individuals, families, and businesses in Nassau County, Suffolk County, Manhattan, Brooklyn, and Queens navigate bankruptcy and emerge on the other side with a real plan for financial recovery. We take the time to understand your specific situation, evaluate your goals, and map out a strategy that protects what matters most to you.

We never sit in judgment. We want to help. We are dedicated to your success.

Call us at 516-493-9920 or visit kfoxlaw.com to arrange your initial consultation. Let us help you take back control.

Frequently Asked Questions

What is the difference between Chapter 7 and Chapter 13 bankruptcy in New York?

Chapter 7 bankruptcy eliminates qualifying unsecured debts, such as credit cards and medical bills, through a court-supervised liquidation process that typically concludes within four to six months. Chapter 13 bankruptcy reorganizes your debt into a three to five year repayment plan, allowing you to keep property and catch up on secured debts like mortgage arrears. In New York, the choice between the two depends primarily on your income relative to the state median, the amount and type of debt you carry, and whether you need to protect a home from foreclosure. An experienced New York bankruptcy attorney can help you identify which chapter fits your situation.

What are the New York Chapter 7 income limits for 2026?

The New York Chapter 7 income limits for 2026 are set by the bankruptcy means test, which compares your average monthly household income over the past six months to the state median. For cases filed on or after April 1, 2026, the income thresholds are $73,272 for a single person, $92,902 for two people, $115,579 for three people, and $139,040 for a family of four. If your income exceeds these figures, you may still qualify for Chapter 7 by demonstrating that your allowable expenses leave little to no disposable income. A bankruptcy attorney at Kamini Fox, PLLC can evaluate your numbers and determine which chapter is available to you.

Can I keep my house if I file for bankruptcy in New York in 2026?

Yes, many New York homeowners keep their house when filing bankruptcy, depending on the chapter they file and the amount of equity they hold. Under the New York state homestead exemption, residents of Nassau, Suffolk, and New York City area counties can protect up to approximately $179,975 of equity in their primary residence, with married couples able to double that amount. In Chapter 13 bankruptcy, you can keep your home regardless of equity level as long as your repayment plan compensates creditors appropriately and you stay current on mortgage payments going forward. Chapter 13 also allows you to cure mortgage arrears over the life of the plan, making it a powerful foreclosure defense tool for Long Island and New York City homeowners.

How long does Chapter 13 bankruptcy take in New York?

Chapter 13 bankruptcy in New York takes three to five years to complete, depending on your income relative to the state median. If your income is below New York's median income for your household size, your repayment plan will last three years unless the court approves a longer period for cause. If your income is above the median, the law generally requires a five-year plan. After you make all required plan payments and complete a court-approved financial management course, the bankruptcy court issues your discharge. A Chapter 13 filing remains on your credit report for seven years from the filing date, compared to ten years for Chapter 7.

What are the Chapter 13 debt limits in New York for 2026?

To qualify for Chapter 13 bankruptcy in 2026, your debts must fall below two separate federal thresholds: $526,700 in unsecured debt and $1,580,125 in secured debt, under 11 U.S.C. Section 109(e). These limits apply to cases filed between April 1, 2025, and March 31, 2028, and are calculated separately, meaning you cannot combine the two categories. For New York homeowners in high-cost markets like Nassau County, Suffolk County, or New York City, carrying a large mortgage balance can push secured debt close to or beyond the ceiling. If your debt exceeds these limits, Chapter 11 may be your alternative, though it is considerably more complex and expensive. Consulting with a bankruptcy attorney is the most reliable way to determine whether you qualify.

What debts cannot be discharged in a Chapter 7 or Chapter 13 bankruptcy in New York?

Certain debts survive both Chapter 7 and Chapter 13 bankruptcy and cannot be eliminated regardless of which chapter you file. These non-dischargeable debts include most student loans, child support and alimony obligations, recent income tax debts, debts arising from fraud or intentional misconduct, and criminal fines or restitution. Chapter 13 offers a slightly broader discharge than Chapter 7, meaning some debts that survive Chapter 7 may be dischargeable at the end of a completed Chapter 13 plan, such as certain property settlement obligations from divorce. Understanding exactly which of your debts are dischargeable is a key part of choosing the right chapter, and a New York bankruptcy attorney can walk you through that analysis in detail.

Do I need a lawyer to file Chapter 7 or Chapter 13 bankruptcy in New York?

You are not legally required to hire a lawyer to file bankruptcy in New York, but filing without one significantly increases the risk of costly mistakes, case dismissal, or loss of assets you could have protected. Chapter 13 in particular requires drafting and confirming a repayment plan that meets strict legal standards, and most people who represent themselves in Chapter 13 cases are unsuccessful. An experienced New York bankruptcy attorney ensures your exemptions are properly claimed, your means test is accurately completed, and your filing strategy is tailored to protect your home, vehicle, and retirement accounts. Kamini Fox, PLLC, has helped thousands of individuals and families in Nassau County, Suffolk County, and the New York City boroughs achieve a successful discharge and a real fresh start.