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What is the difference between Chapter 7 and Chapter 13 bankruptcy and the timeline for each?Written by: Jeffrey Daniel Larkin Reputation Level 15
Posted over 2 years ago. 6 helpful votes, 0 comments
1
Chapter 7Also called a “straight bankruptcy”, chapter 7 involves the liquidation of non-exempt assets for the benefit of creditors. Most chapter 7 cases are considered “no asset” cases meaning there will be no liquidation or distribution of assets to unsecured creditors. Absent liquidated assets, creditors do not receive any payment on their claims. Chapter 7 generally involves a 3-4 month process. Approximately 30 days from the date the bankruptcy is filed, a hearing is held where a trustee asks specific questions to the debtor under penalty of perjury to ensure the information is complete and accurate. After the hearing, the trustee reports back to the court about the status of your case. Assuming there are no issues, the trustee informs the court that the case is in proper form and that a discharge can be processed. Once the deadlines pass for parties in interest to object to your case, the court will enter the order discharging your debts and closing the file. 2
Chapter 13Sometimes called a “wage earner plan” chapter 13 involves the consolidation of debts and repayment of a certain percentage of those debts to unsecured creditors over a period of time. Generally speaking, the repayment term is anywhere from 3-5 years. The amount required to be repaid is determined using a formula that includes your income, current debt and other factors. Just as with chapter 7 cases, a hearing is held approximately 30 days from the filing where the trustee reviews the case and ensures its accuracy. If the trustee has no issues with your case he will approve it on the spot and the debtor simply makes the monthly payment pursuant to the plans specific terms. If the trustee takes issue with any aspect of your case he will object to confirmation and set a hearing date to have the issues addressed and resolved in front of a bankruptcy judge. Once all payments have been made pursuant to the court approved plan, discharge is entered and remaining debts are eliminated. Additional ResourcesRelated Questions2 Attorney answers: 
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