Why Chapter 7 Bankruptcy Is More Common Than Chapter 13 in Nevada
According to the American Bankruptcy Institute, in 2025, 7,805 Chapter 7 bankruptcies were filed compared to 1,486 Chapter 13 bankruptcies. This makes Chapter 7 the most common type of bankruptcy for consumer debtors. But why is Chapter 7 so much more common than Chapter 13?
First, Chapter 7 is typically faster and more affordable. The process typically takes 3 to 6 months. With Chapter 13, the debtor must make payments for 3 to 5 years. If a debtor can’t make payments on time, a Chapter 13 case can become very costly and cause more problems than it solves.
Second, Chapter 7 is the best option if you have a low income, which most debtors have. Chapter 7 is available to individuals whose income is below Nevada’s median income.
Chapter 13, on the other hand, is generally available only to individuals whose income is well above the median income, since they must follow a payment plan.
Third, Chapter 7 is the most common bankruptcy type because it lets you eliminate your debts without losing a lot. Through the liquidation of non-exempt assets, which most Chapter 7 filers have very little of, debts can be erased. Compared to Chapter 13, which requires a substantial monthly payment.
How Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves selling certain non-exempt assets and using the proceeds to pay your creditors. The process begins with filing a bankruptcy petition, which triggers an automatic stay that halts most collection efforts. A court-appointed trustee then reviews your assets and liabilities and may sell nonexempt property to repay creditors.
A Chapter 7 case typically takes 3 to 6 months from filing to discharge. Once you complete a debtor education course, the court issues a discharge, which legally exempts you from repaying most of your unsecured debts, such as credit card charges and medical bills.
Liquidation Process
A court-appointed trustee oversees the entire process and ensures that the debtor’s assets are liquidated efficiently. The trustee reviews your financial documents, sells non-exempt property, and distributes funds to creditors. If you have no non-exempt assets, the trustee files a “no-asset” report and closes the case quickly.
Nevada bankruptcy attorney Rodney Okano says most clients he files Chapter 7 bankruptcies for have little to no non-exempt assets, so the liquidation process is typically quick.
Typical Chapter 7 Timeline From Filing to Discharge
Chapter 7 typically wraps up much faster than Chapter 13, usually in 3 to 6 months. Here’s a quick breakdown:
- Day 1: Filing your paperwork officially starts your case.
- Weeks 3-6: You’ll attend the 341 meeting with your trustee and creditors.
- Month 2-3: The court grants your discharge, wiping out most of your debts.
- Month 4-6: The case closes unless your trustee needs to sell assets or handle complications.
The discharge is the moment your debts are officially forgiven. However, the case can stay open longer if there are objections or if assets are being liquidated.
How Chapter 13 Bankruptcy Works
Under Chapter 13, your monthly payments go to a court-appointed trustee, who distributes the funds to your creditors according to your repayment plan. This plan allows you to catch up on secured debts, such as your car payment, while making payments to unsecured creditors like credit card debt. The repayment period can last from 3 to 5 years, depending on your income and expenses.
Unlike Chapter 7, which discharges debts immediately, Chapter 13 offers a structured approach to resolving debts over time. This option may provide relief from debts that are otherwise difficult to pay off, such as student loans or tax debts. Additionally, Chapter 13 can help you avoid foreclosure or repossession by allowing you to make catch-up payments over time.
Repayment Plans and Their Length
Chapter 13 requires a repayment plan, but the length depends on your income and your creditors’ needs. Most of the time, you’ll have to repay your debt over 3-5 years.
If your income is higher than the state median, you’ll likely have a 3-year plan. If your income is lower than the median, you’ll likely have a 5-year plan.
Types of Debt Addressed in a Repayment Plan
The debts included in your Chapter 13 repayment plan include:
- Priority Debts: Certain debts must be paid in full through your plan. These include domestic support obligations (such as alimony and child support), recently incurred taxes, and wages owed to employees.
- Secured Debt: If a creditor has the right to repossess your property if you default (fail to make payments) on your loan obligation, then that debt is “secured.” Examples of secured debt include your mortgage (secured by your house) and car loans.
- Nonpriority Unsecured Debt: Most of your remaining debts will be “nonpriority unsecured debts.” These include credit card debts, medical bills, and personal loans.
Nevada Means Test and Income Eligibility
The means test is the barrier to a Chapter 7 and checks if you’re making less than the Nevada median income for your household size. Without the means test, it’s likely more than half of the Chapter 13s filed would be Chapter 7s.
“Failing” the means test, meaning that you make over the Nevada median income amount for your household size, will force you to file a Chapter 13 bankruptcy instead, as you’ll be seen as able to follow a repayment plan.
Median Income Thresholds for Nevada Households
Nevada’s means test thresholds are based on the median household income for households of various sizes, which is calculated by the U.S. Census Bureau. These thresholds determine whether a filer is eligible for a “straight” Chapter 7 (liquidation) or must file Chapter 13 (reorganization) based on income.
Here are the 2026 median income thresholds for Nevada by household size:
- Household Size 1: $72,222 a year
- Household Size 2: $87,914 a year
- Household Size 3: $101,638 a year
- Household Size 4: $114,110 a year
Nevada Property Exemptions That Protect Assets in Chapter 7
A strong foundation of exemptions helps you keep essential assets and protect your financial future. For example, Nevada’s generous homestead exemption can shield up to $605,000 in equity, enabling you to keep your primary residence even in liquidation. The state also protects certain vehicle and personal property up to $15,000, while other categories like household goods, jewelry, and retirement accounts are also safeguarded.
On top of that, Nevada provides a $10,000 wild card exemption to protect assets not listed within the exemption list. This wild card can be stacked up to $20,000 if you’re filing jointly with your partner.
These exemptions give you more control over your assets and make Chapter 7 an attractive option for those looking to become debt-free.