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Differences between Chapters 7 and 13 of the Bankruptcy Code

March 07, 2022

By: Mark Haut, PRACTICAL GUIDANCE BANKRUPTCY TEAM with assistance from Emony Robertson, LEXISNEXIS RULE OF LAW FOUNDATION FELLOW

This chart details the differences between Chapters 7 and 13 of the Bankruptcy Code and can be used to guide attorneys in understanding the differences between these chapters. 

Practical Guidance supports the efforts to advance what’s possible in the world by strengthening the rule of law, illustrating transparency in the law, and providing equitable access to legal remedies. In connection therewith, this checklist contains a short list of questions practitioners should pose when counseling consumer clients to file for Chapter 7, or alternatively, Chapter 13. For more information, see Advancing the Rule of Law in Consumer Bankruptcies below.

Overview of Chapters 7 and 13

Chapter 7 of the Bankruptcy Code is utilized by individual
and business debtors to liquidate assets. Chapter 7 cases are designed to give (1) an individual debtor a fresh start in the form of discharge of his or her debts and (2) a business debtor relief from its debts through an orderly dissolution process. In exchange for the fresh start or business relief, the debtor submits its assets to the control of a Chapter 7 trustee. If the Chapter 7 trustee discovers value in the debtor’s assets, the trustee is required to sell those assets and distribute the proceeds to the debtor’s creditors. Chapter 13 is for individuals (other than stockbrokers or commodity brokers) residing (or with a domicile or place of business) in the United States with regular income sufficiently stable to make payments under a Chapter 13 plan. After the debtor completes plan payments, a discharge issues for the remainder of the debt not paid through the Chapter 13 plan, giving the debtor his or her fresh start.

Eligible Debtors Chapter 7 Chapter 13

For All Chapters: An individual cannot file
under any chapter if, during the preceding
180 days, the individual previously filed a
bankruptcy petition that was dismissed (1) by
the court because the individual disobeyed
orders or failed to appear to prosecute the case
or (2) on the individual debtor’s motion after
a request for relief from stay had been filed.
11 U.S.C.S. §§ 109(g), 362(d), and (e). Subject to
certain exceptions, an individual also may not
be a debtor under any chapter unless he or she
received credit counseling from an approved
credit counseling agency in an individual or a
group briefing within 180 days before filing.
11 U.S.C.S. §§ 109(h), 111.

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:
11 U.S.C.S. §§ 101, 109(g) , 362, 707

Related Content:
• Chapter 7 Liquidation
• Chapter 13 Bankruptcy

Individuals, stockbrokers, commodity brokers, corporations,
and certain other business entities may file for relief under Chapter
7. 11 U.S.C.S. §§ 101(13) and (41), 109(b). Railroads and domestic
and foreign insurance companies, banks, and credit unions are not
eligible for relief under Chapter 7. 11 U.S.C.S. § 109(b).

The amount of the debtor’s debt does not impact an individual
or business debtor’s ability to seek relief under Chapter 7. The
individual or business debtor simply must owe debts. However,
an individual debtor’s income level may impact the ability to seek
relief under Chapter 7. The means test may force individual debtors
into Chapter 13 if they want to obtain a discharge of their debts
(described later in this chart).

Only individuals may be debtors
under Chapter 13. To qualify, the
individual, as of the petition date,
must have regular income and:

  • Owe noncontingent, liquidated,
    unsecured debts of less than
    $419,275 and noncontingent,
    liquidated, secured debts of less
    than $1,257,850 –or–
  • The individual and a spouse
    (except a stockbroker or a
    commodity broker) must be
    below the same debt limits
    11 U.S.C.S. § 109(e).

 

Filing for Bankruptcy Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:
11 U.S.C.S. §§ 301, 303

Related Content:

  • Chapter 7 Liquidation
  • Chapter 13 Bankruptcy
  • Involuntary Bankruptcy Cases
  • Preparing for a Bankruptcy Filing Checklist
  • Voluntary Petition (Official Form 201)

The debtor may commence a Chapter 7 case by filing a
voluntary petition. 11 U.S.C.S. § 301. Creditors can commence
an involuntary case by filing an involuntary petition against the
debtor. 11 U.S.C.S. § 303(b).

A Chapter 13 case may only be commenced by the debtor filing
a voluntary bankruptcy petition. 11 U.S.C.S. §§ 301, 303(a).

 

Trustees Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections / Bankruptcy Rules:
11 U.S.C.S. §§ 521, 701, 702,
703, 704, 707, 1106, 1302,
1322, 1326

Fed. R. Bankr. P. 2015

Related Content:

  • Chapter 7 Trustee Duties
  • Chapter 7 Trustee Duties
    Checklist
  • Chapter 13 Trustee Duties
  • Section 341 Meeting
    Preparation (Consumers)
  • Reaffirmation Agreements
    in Chapter 7
  • Converting a Bankruptcy
    Case Checklist

Upon the filing of a Chapter 7 petition, the U.S. Trustee will appoint a panel member to serve for that
particular case. 11 U.S.C.S. § 701. At the Section 341 meeting of creditors, creditors may request an election
be held to appoint a permanent trustee. 11 U.S.C.S. § 702. If no such request is received and no election
is held, the interim trustee becomes the permanent trustee in the case. 11 U.S.C.S. § 702(d).

The Chapter 7 trustee must perform certain duties
pursuant to Section 704 of the Bankruptcy Code
including the following:

  • Collect property of the estate. 11 U.S.C.S. § 704(a)(1).
  • Be accountable for all property received by the
    trustee. 11 U.S.C.S. § 704(a)(2); see also Bankruptcy
    Rule 2015.
  • Ensure the debtor files a statement of intentions
    and performs the intentions as stated. 11 U.S.C.
    § 704(3).
  • Investigate the debtor’s financial affairs. 11 U.S.C.S.
    § 704(a)(4).
  • Examine and, if appropriate, object to claims.
    11 U.S.C.S. § 704(a)(5).
  • Object to discharge (if appropriate). 11 U.S.C.S.
    § 704(a)(6).
  • Provide requesting creditors information concerning
    the case. 11 U.S.C.S. § 704(a)(7).
  • File periodic reports and summaries with the court.
    11 U.S.C.S. § 704(a)(8).
  • File a final report and accounting with the court and
    the U.S. Trustee. 11 U.S.C.S. § 704(a)(9).
  • Provide certain notices with regard to domestic
    support claims. 11 U.S.C.S. § 704(a)(10)
  • Continue the administration of any employee
    benefit plan held by a business in a Chapter 7 case.
    11 U.S.C.S. § 704(a)(11).
  • Use all reasonable and best efforts to transfer
    patients from a closing healthcare business in a
    Chapter 7 case to another appropriate healthcare
    business. 11 U.S.C.S. § 704(a)(12).

A Chapter 7 trustee must also fulfill the obligations outlined in the U.S. Trustee’s Handbook For Chapter 7 Trustees (Handbook).
These obligations consist of, among other things, reviewing debtor documents to ensure adequacy and timeliness, including
the following documents:

  • Chapter 7 petition
  • Credit counseling certificate
  • Social security statement
  • Schedules and statement of financial affairs 
  • Statement of exemptions
  • Statement of debtor’s attorney’s fees
  • Review for bankruptcy preparers
  • Pay advices
  • Tax returns
    According to the Handbook, if the debtor is a business, the Chapter 7 trustee
    must also perform the following duties promptly after the petition date:
  • Review the books and records of the debtor.
  • Preserve business assets.
  • Determine whether the employment of any professionals is necessary.
    The Chapter 7 trustee has additional duties, including:
  • Discuss the effect of reaffirming debts with the debtor prior to examining
    him or her at the Section 341(a) meeting of creditors
  • Preside over the Section 341 meeting of creditors
  • Advise and examine the debtor at the Section 341 meeting of the effects
    of commencing a Chapter 7 case
  • Review the debtor’s filings and testimony for compliance (11 U.S.C.S.
    § 521) and any evidence of substantial abuse that provides a basis for a
    motion to dismiss (or convert) pursuant to Section 707(b)
  • Notify the U.S. Trustee if, after reviewing the material listed above, the
    trustee determines that such evidence exists
  • Report suspected criminal activity to the U.S. Trustee

Chapter 13 debtors retain possession of their assets and
are permitted to continue business operations (to the
extent applicable) during the bankruptcy. In Chapter 13, a
bankruptcy trustee is appointed at the commencement of the
case. 11 U.S.C.S. § 1302(a). The Chapter 13 Trustee must
perform some of the same tasks as a Chapter 7 trustee and
certain additional tasks, including the tasks listed below:

  • Be accountable for all property
    received by the trustee.
    11 U.S.C.S. §§ 1302(b)(1),
    704(a)(2); see also Bankruptcy
    Rule 2015(c) (expands on the
    requirements for Chapter 13
    trustees).
  • Ensure the debtor files a
    statement of intentions and
    performs the intentions as
    stated. 11 U.S.C.S. §§ 1302(b)
    (1), 704(3). Note that this
    requirement may be a
    drafting error. See Collier on
    Bankruptcy P 1302.03.
  • Investigate the debtor’s
    financial affairs. 11 U.S.C.S.
    §§ 1302(b)(1), 704(4).
  • Examine and, if appropriate,
    object to claims. 11 U.S.C.S.
    §§ 1302(b)(1), 704(5).
  • Object to discharge (if
    appropriate). 11 U.S.C.S.
    §§ 1302(b)(1), 704(6).
  • Provide requesting creditors
    information concerning the
    case. 11 U.S.C.S. §§ 1302(b)(1),
    704(7).
  • File a final report and accounting with the
    court and the U.S. Trustee. 11 U.S.C.S.
    §§ 1302(b)(1), 704(9).
  • Appear and be heard at a hearing on the value
    of property subject to a lien, confirmation
    hearing, and plan modifications. 11 U.S.C.S.
    § 1302(b)(2).
  • Advise and assist the debtor in performance
    under the plan. 11 U.S.C.S. § 1302(b)(4).
  • Ensure the debtor makes timely payments
    under the plan. 11 U.S.C.S. § 1302(b)(5).
  • Provide notices to domestic support
    claimholders and related parties. 11 U.S.C.S.
    § 1302(b)(6).
  • If the debtor is engaged in business, the
    Chapter 13 trustee has certain additional
    obligations. 11 U.S.C.S. §§ 1302(c), 1106(a)(3),
    1106(a)(4).
  • Collect plan payments and make distributions
    to creditors in accordance with the debtor’s
    plan. 11 U.S.C.S. §§ 1322(a)(1), 1326.

The Chapter 13 trustee has additional duties,
including:

  • Preside over the Section 341 meeting of
    creditors
  • Advise and examine the debtor at the Section
    341 meeting of the effects of commencing a
    Chapter 13 case

 

Means Test Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections / Bankruptcy Rules:
11 U.S.C.S §§ 101(10A),
101(39A), 707, 1325

Fed. R. Bankr. P. 1007

Related Content:

  • Chapter 7 Liquidation
  • Chapter 13 Bankruptcy
    Means Test
  • Chapter 13 Bankruptcy
  • Census Bureau, IRS data and
    Administrative Expenses
    Multipliers
  • Chapter 7 Statement of Your
    Current Monthly Income
  • Chapter 13 Statement
    of Your Current Monthly
    Income and Calculation of
    Commitment Period
  • Chapter 7 Means Test
    Calculation
  • Chapter 13 Calculation of
    Disposable Income
  • Statement of Exemption
    from Presumption of Abuse
    Under § 707(b)(2)

The means test identifies Chapter 7 individual debtors who can repay some
of their debts and forces them into Chapter 13 if they want to obtain a
discharge of their debts. The means test calculates an individual debtor’s
disposable income and estimates the debtor’s ability to repay general
unsecured debts. The means test is used to determine whether a Chapter 7 case
is presumed abusive for purposes of dismissal. 11 U.S.C.S. § 707(b).

Statement of Current Monthly Income

The Chapter 7 statement of current monthly income (CMI) is the first part of
the Chapter 7 means test and is divided into two parts. 11 U.S.C.S. § 101(10A).
Part 1 requires the debtor to calculate his or her CMI. This part is the same
under Chapters 7 and 13. Part 2 compares the debtor’s CMI to the
applicable median income for the debtor’s state of residency to determine
whether the Chapter 7 case is presumed abusive. Each state has its own median
family income which can be found on the U.S. Department of Justice website.

If the debtor’s CMI is below the applicable median income, then no
further action with regard to the means test is needed. If the debtor’s CMI is
above the applicable median income, the Chapter 7 means test calculation
form must be filled out.

Calculation of Income

The Chapter 7 means test is the second part of the Chapter 7 means test.
It calculates the debtor's income and is divided
into four parts.

Part 1 of the Chapter 7 means test adjusts the debtor's CMI
by subtracting any portion of the debtor's spouse's income not
regularly used to pay household expenses (marital deduction).

Part 2 of the Chapter 7 means test calculates the debtor's
monthly disposable income by deducting certain living
expenses and debt payments from the debtor's CMI. The U.S.
Department of Justice posts links to the allowed expense data
for bankruptcy practitioners.

Part 3 of the Chapter 7 means test determines whether
a presumption of abuse exists by multiplying the debtor's
disposable income by 60 months. The presumption of abuse
arises if the individual debtor's five-year disposable income is
greater than $13,650. Alternatively, the presumption of abuse
arises if the individual debtor's five-year disposable income is
at least $8,175 but not more than $13,650 and enough to pay
25% of the total general unsecured debt.

Part 4 of the Chapter 7 means test permits the debtor to list
any special circumstances that justify additional deductions
or adjustments to the debtor's disposable income. To claim
special circumstances, a debtor must itemize each and provide
documentation of the additional expense/adjustment claimed.
Note that special circumstances are rarely allowed.

Statement of Exemption

Certain Chapter 7 individual debtors may claim an exemption
from a presumption of abuse if the debtor is one or more of
the following:

  • A business debtor with primarily nonconsumer debts
  • A disabled veteran whose debts were mostly incurred while
    on active duty or performing a homeland defense activity
  • A reservist or member of the National Guard under certain
    circumstances

If any of the above applies, the debtor may claim the
exemption and is not required to fill out the remainder of the
Chapter 7 means test.

In Chapter 13 cases, the means test
determines the applicable commitment period
for the Chapter 13 plan and the debtor’s
disposable income necessary for inclusion in
the plan. 11 U.S.C.S. § 1325.

Statement of Current Monthly Income

The Chapter 13 statement of current monthly
income (CMI) is the first part of the Chapter
13 means test and is divided into three parts.

Part 1 requires the debtor to calculate his or her CMI. This part is the same under Chapters
7 and 13. Part 2 of the Chapter 13 means test (1) adjusts the debtor’s CMI by subtracting
any portion of the debtor’s spouse’s income not regularly used to pay household expenses
(marital adjustment) and (2) compares the debtor’s adjusted CMI to the applicable
median income for the debtor’s state of residency. Each state has its own median
family income which can be found on the U.S. Department of Justice website.

Part 3 of the Chapter 13 means test calculates the applicable commitment period.
If the debtor’s current monthly income is less than the median family income applicable
to the debtor, then (1) the commitment period for the Chapter 13 plan is three years,
and (2) no further action with regard to the means test is needed. If the debtor’s current
monthly income is above the median family income applicable to the debtor, then (1) the
commitment period for the Chapter 13 plan must be five years, and (2) the Chapter 13
disposable income calculation form must be filled out.

Calculation of Income

The Chapter 13 calculation of disposable income is the second
part of the Chapter 13 means test and is divided into three
parts.

Part 1 of the Chapter 13 calculation of disposable income
adjusts the debtor’s CMI by deducting certain living expenses
and debt payments from the debtor’s CMI. The U.S.
Department of Justice posts links to the allowed expense data
for bankruptcy practitioners.

Part 2 of the Chapter 13 calculation of disposable income
(1) permits the deduction of certain additional expenses from
the debtor’s CMI and (2) calculates the debtor’s disposable
monthly income. This is the amount required to be paid
monthly to unsecured creditors through the Chapter 13 plan
under Section 1325(b). Monthly disposable income multiplied
by 60 represents the minimum amount that the debtor must
pay to general unsecured creditors.

Part 3 of the Chapter 13 means test permits the debtor to list
any special circumstances that justify additional deductions
or adjustments to the debtor’s disposable income. To claim
special circumstances, a debtor must itemize each and provide
documentation of the additional expense/adjustment claimed.
Note that special circumstances are rarely allowed.

Statement of Exemption

There is no exemption from completing the Chapter 13 means
test. All Chapter 13 debtors must complete both the Chapter
13 Statement of Income and Chapter 13 Calculation of
Disposable Income forms.

 

Tax Returns Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections or Rules:

11 U.S.C.S. §§ 521, 1308

Fed. R. Bankr. P. 4002

Related Content:

  • Chapter 7 Liquidation
  • Chapter 13 Bankruptcy
  • Individual Chapter 7
    Timeline
  • Chapter 13 Timeline
  • Section 341 Meeting
    Preparation (Consumers)

Chapter 7 debtors must provide the Chapter 7 trustee with their most recent
federal income tax return no later than seven days prior to the date first set for
the Section 341(a) meeting of creditors. 11 U.S.C.S. § 521(e)(2); Fed. R. Bankr. P.
4002(b)(3).

If the debtor does not submit and file the requisite tax returns and fails
to show that circumstances beyond the debtor’s control prevented the
submission, the bankruptcy court will dismiss the case. See 11 U.S.C.S. § 521(e)
(2)(B).

Chapter 13 debtors must provide the Chapter 13 trustee with their most recent federal
income tax return no later than seven days prior to the date first set for the Section
341(a) meeting of creditors. 11 U.S.C.S. § 521(e)(2); Fed. R. Bankr. P. 4002(b)(3).
If the debtor does not submit and file the requisite tax returns and fails to show that
circumstances beyond the debtor’s control prevented the submission, the bankruptcy
court will dismiss the case. See 11 U.S.C.S. § 521(e)(2)(B).

Chapter 13 debtors must also ensure that all tax returns required to be filed within
the four-year period preceding the filing of the Chapter 13 case have been filed with
the appropriate taxing authority. 11 U.S.C.S. § 1308.

 

Professionals Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections or Rules:

11 U.S.C.S. § 327.
Fed. R. Bankr. P. 2014.

Related Content:

  • Approval of the Debtor’s
    Chapter 11 Professionals
  • Chapter 13 Retainer
    Agreement
  • Trustee’s Application
    for Interim Allowance
    of Compensation and
    Disbursements

A Chapter 7 trustee must retain
professionals pursuant to Section 327(a)
of the Bankruptcy Code and Bankruptcy
Rule 2014.

A Chapter 13 trustee must retain
professionals pursuant to Section 327(a) of
the Bankruptcy Code and Bankruptcy Rule
2014.

A Chapter 13 debtor does not need court
approval to retain professionals. However, in
certain instances, a Chapter 13 debtor should
request court approval to retain professionals.
For example, a Chapter 13 debtor may
need to engage outside counsel to pursue
a personal injury claim. If employment is
not approved by the bankruptcy court, the
professional may not be able to collect any
fees.

 

Statement of Intentions Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections or Rules:

11 U.S.C.S. § 524

Fed. R. Bankr. P. 4004, 4008

Related Content:

  • Reaffirmation Agreements
    in Chapter 7

An individual Chapter 7 debtor must file a statement
of intentions with regard to debts secured by property
of the estate. 11 U.S.C.S. § 521(a)(2)(A); Fed. R. Bankr.
P. 1007(b)(2). The statement must indicate whether
the debtor intends to reaffirm, redeem, or surrender
such property and, if applicable, must state whether
the property is claimed as exempt. The debtor must file
the statement within 30 days after the petition date
or on or before the date of the meeting of creditors,
whichever is earlier.

The debtor must perform his or her intention (as set
forth on the statement) within 30 days of the first
set date for the Section 341(a) meeting of creditors.
11 U.S.C.S. § 521(a)(2)(B).

A statement of intentions is
not required in a Chapter 13
bankruptcy case. Chapter 13
debtors specify their intentions
in a Chapter 13 plan (discussed
below).

 

Reaffirmation Agreement Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections or Rules:

11 U.S.C.S. § 327
Fed. R. Bankr. P. 2014

Related Content:

  • Approval of the Debtor’s
    Chapter 11 Professionals
  • Chapter 13 Retainer
    Agreement
  • Trustee’s Application
    for Interim Allowance
    of Compensation and
    Disbursements

A reaffirmation agreement is a voluntary contract
between the debtor and a creditor to establish the
validity of a particular debt and except the debt from
a Chapter 7 discharge. In some instances, a debtor
may desire to continue paying on a specific debt even
though the debt could be discharged in the bankruptcy
case. In those instances, a reaffirmation agreement
may be utilized to except the debt from discharge
and contractually bind the debtor to the repayment.
Reaffirmation agreements are usually reserved for
secured debts where the debtor wants to keep the
property that secures the debt. Section 524 of the
Bankruptcy Code sets forth the requirements for an
enforceable reaffirmation agreement.

A reaffirmation agreement must be filed no later than
60 days after the date first set for the Section 341(a)
meeting of creditors. Fed. R. Bankr. P. 4008(a).

The court has discretion to enlarge the time to file
a reaffirmation agreement. Id. A debtor can make a
motion to defer entry of the discharge if they need
additional time to negotiate reaffirmation agreements.
Fed. R. Bankr. P. 4004(c)(2)

Reaffirmation agreements are
not relevant in Chapter 13
cases. The Chapter 13 plan
details the treatment of claims
and property in Chapter 13
cases.

 

Redemption Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:

11 U.S.C.S. § 722
Fed. R. Bankr. P. 6008

Related Content:

  • Redemption in Chapter 7

Redemption is the process through
which an individual Chapter 7 debtor
may retain certain personal property
by making a lump-sum payment to the
secured creditor of the fair market value
of the property or the amount of claim.
Redemption only applies to exempt or
abandoned, tangible, personal property
that is used primarily for personal, family,
or household use and is subject to a lien
securing a dischargeable consumer debt.

Redemption may be voluntary through
an agreement between the debtor and
the creditor. If the creditor does not
consent, however, the debtor may file a
motion under Bankruptcy Rule 6008 for
court authorization of the redemption.

Redemption is not utilized in Chapter
13 cases. The Chapter 13 plan details
the treatment of claims and property
in Chapter 13 cases.

 

Automatic Stay Chapter 7 Chapter 13

Individual Debtors:
The automatic stay is limited where the
individual debtor has filed one prior
case under Chapter 7, Chapter 11, or
Chapter 13, dismissed within one year
of the current pending case. 11 U.S.C.S.
§ 362(c). Where the individual debtor
has filed two or more prior cases under
Chapter 7, Chapter 11, or Chapter 13,
the automatic stay is unavailable in the
pending case. 11 U.S.C.S.§ 362(c)(4)(A).

Relevant Bankruptcy Code Sections or
Rules:

11 U.S.C.S. §§ 101, 362, 521, 1301

Related Content:

  • Automatic Stay
  • Automatic Stay: When the Debtor
    Is an Individual
  • Co-debtor Stay

Collection efforts against non-debtor
co-obligors, guarantors, codefendants,
partners, and sureties are not
automatically stayed. 11 U.S.C.S.
§ 362(a).

In an individual debtor’s bankruptcy
case, the automatic stay terminates
with respect to personal property if the
debtor fails to timely comply with the
requirement in Section 521(a)(2) that
the debtor file a statement of intention
and perform such intention for such
property. 11 U.S.C.S.§ 362(h)(1).

Subject to certain exceptions,
the automatic stay applies to
stay collection efforts against
co-obligors for consumer debt.
11 U.S.C.S.§ 1301; see also
11 U.S.C.S. § 101(8) (for the
definition of consumer debt).

Section 362(h) only applies in Chapter
7 and not an individual debtor’s case
under Chapter 13 even though the
statute does not limit its applicability
to Chapter 7. The reason is that
Section 362(h) requires compliance
with Section 521(a)(2), which only
applies to Chapter 7 cases (and both
sections only apply to individual
cases).

 

Proof of Claims Chapter 7 Chapter 13

Relevant Bankruptcy Code
Sections or Rules:

Fed. R. Bankr. P. 2002, 3002

Related Content:

  • Proofs of Claim in an
    Individual Bankruptcy
  • Proofs of Claim in
    Bankruptcy
  • Proofs of Claim Categories
    and Calculations
  • Chapter 7 Liquidation
  • Proof of Claim (US
    Bankruptcy Court Official
    Form 410)
  • Addendum to Proof of Claim

In a Chapter 7 case, a proof of claim is timely filed if it
is filed not later than 70 days after the petition date or
the date of conversion to the chapter (and 90 days after
the order for relief in an involuntary case).
Fed. R. Bankr. P. 3002(c).

Governmental units generally have 180 days after entry
of the order for relief to file proofs of claim.
Fed. R. Bankr. P. 3002(c)(1).

The exception to these deadlines is when the trustee
files and serves a notice of insufficient assets to pay
a dividend. Fed. R. Bankr. P. 2002(e). In most cases,
a Chapter 7 debtor has no assets to distribute to
creditors. Such cases are known as no asset cases. The
trustee will send a notice to unsecured creditors that
they do not need to file proofs of claim because there
will not be a distribution.

If the Chapter 7 trustee later determines that the
debtor has assets that can be liquidated for distribution
to unsecured creditors, the trustee will notify
unsecured creditors to file proofs of claim so that they
may participate in the distribution. The notice must
provide at least 90 days’ notice by mail to creditors of
the date for filing proofs of claim.

In a Chapter 13 case, a proof of
claim is timely filed if it is filed
not later than 70 days after
the petition date or the date of
conversion to the chapter (and
90 days after the order for
relief in an involuntary case).
Fed. R. Bankr. P. 3002(c).

Governmental units generally
have 180 days after entry
of the order for relief to file
proofs of claim. Fed. R. Bankr.
P. 3002(c)(1).

 

Convert or Dismiss Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections or
Rules:

11 U.S.C.S. §§ 706, 1307
Fed. R. Bankr. P. 1017, 9013, 9014

Related Content:

  • Conversion and Dismissal Resource Kit
  • Converting a Bankruptcy Case Checklist
  • Debtor’s Motion to Convert (Chapter 7
    to Chapter 13)
  • Non-debtor’s Motion to Dismiss or
    Convert (Chapter 7 to Chapter 13 Case)
  • Voluntary Conversion Order (Chapter 7
    to Chapter 12 or 13)
  • Voluntary Conversion Order (Chapter 7
    to Chapter 11)
  • Involuntary Conversion Order (Chapter
    7 to Chapter 11)
  • Notice of Conversion (Chapter 13 to
    Chapter 7)
  • Non-debtor Motion to Dismiss or
    Convert (Chapter 13 to Chapter 7)
  • Conversion Order (Chapter 13 to
    Chapter 7)
  • Involuntary Conversion Order (Chapter
    7 to Chapter 13)

A Chapter 7 debtor may voluntarily
convert to a Chapter 11, 12, or 13
case, at any time, if (1) he or she is
eligible under the rules for those
chapters and (2) the Chapter 7 case
was not previously converted from a
Chapter 11, 12, or 13 case. 11 U.S.C.S.
§ 706(a). The debtor must file a motion
to convert under Section 706(a) and
serve the motion in accordance with
Bankruptcy Rule 9013.

Fed. R. Bankr. P. 1017(f)(2).

The court considers whether (1) the
case has been previously converted,
(2) the debtor is eligible for the
chapter he or she seeks to convert to,
and (3) the conversion is sought in bad
faith prior to entering an order on a
motion to convert a Chapter 7 case.
Any waiver of the right to convert
under Section 706(a) is unenforceable.

Section 706(c) provides that a Chapter
7 case may not be converted to a
Chapter 12 or Chapter 13 case unless
the debtor consents to (or requests)
such conversion. 11 U.S.C.S. § 706(c).
However, the court may convert a
Chapter 7 case to a Chapter 11 case
on the request of a party in interest
at any time after notice and a hearing.
11 U.S.C.S.§ 706(b). An involuntary
conversion from a Chapter 7 case to
Chapter 11 only occurs in corporate
(not an individual) cases.

The court may dismiss a Chapter 7 case, upon notice
and a hearing, for cause including:

  • Unreasonable delay by the debtor that is prejudicial
    to creditors
  • Nonpayment of any fees –and–
  • For a U.S. Trustee motion, failure of the debtor to file
    the information required under Section 521(1)

11 U.S.C.S .§ 707(a). The factors listed in Section 707(a)
are non-exhaustive and the bankruptcy court may
dismiss a Chapter 7 case on other grounds if the court
finds sufficient cause.

The court may also dismiss a Chapter 7 case if the
debtor’s debts are mainly consumer and if granting a
discharge would be an abuse of Chapter 7 based upon:

  • The outcome of the means test
  • Bad faith –or–
  • The totality of the circumstances

11 U.S.C.S. § 707(b)(1)–(b)(3)

The debtor has an absolute right
to convert a Chapter 13 case to a
case under Chapter 7. 11 U.S.C.S.
§ 1307(a); Fed. R. Bankr. P. 1017.
The debtor must file a notice of
conversion to convert the case. Fed.
R. Bankr. P. 1017(f)(3). The debtor
also has an absolute right to dismiss
a Chapter 13 unless the case was
previously converted from a Chapter
7, 11, or 12 case. 11 U.S.C.S.
§ 1307(b); Fed. R. Bankr. P. 1017(f).

The court may convert a Chapter 13 case to a Chapter 11 or 12 case
prior to confirmation of a Chapter 13 plan, after notice and a hearing.
11 U.S.C.S. § 1307(d). The court may also grant a party’s motion to
convert to Chapter 7 or dismiss the Chapter 13 case where there is
cause justifying conversion or dismissal of the case. Section 1307(c)
currently lists 11 nonexclusive examples of cause:

  • Unreasonable delay that is prejudicial to creditors
  • Failure to pay statutory fees or charges
  • Failure to file a plan within the time fixed by the Bankruptcy
    Code or the court
  • Failure to make timely payments under a plan
  • Denial of an order confirming a plan and request for time to refile
    or modify a plan
  • Material default by the debtor with respect to a confirmed plan
  • Revocation and denial of an order confirming a plan
  • Termination of a confirmed plan based on the occurrence of a
    condition set forth in the plan
  • Failure to timely file schedules and statement of financial affairs
    (on request by the trustee)
  • Failure to file a statement of intention with respect to property
    subject to liens (on request by the trustee)
  • The debtor’s failure to pay post-petition domestic support
    obligations

11 U.S.C.S. § 1307(c).

Section 1307(e) requires the bankruptcy court to convert a Chapter
13 case to Chapter 7 (or dismiss the Chapter 13 case) upon request
by a party in interest if the debtor fails to file a tax return as required
under Section 1308 of the Bankruptcy Code. 11 U.S.C. § 1307(e)

 

Plan/Confirmation Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:

11 U.S.C.S. §§ 1307, 1321, 1322, 1324,
1325, 1326

Fed. R. Bankr. P. 3015

Related Content:

  • Chapter 13 Bankruptcy
  • Chapter 13 Timeline
  • Official Form B113, Chapter 13 Plan

There is no plan in Chapter 7
bankruptcy cases.

A Chapter 13 debtor must file a
Chapter 13 plan with the petition
or within 14 days thereof, unless
the court extends the time for filing.
11 U.S.C.S. § 1321; Fed. R. Bankr. P.
3015(b). Most jurisdictions require
the use of a standardized form
Chapter 13 plan. See Official Form
B113, Chapter 13 Plan. Section
1322 of the Bankruptcy Code sets
forth the mandatory and optional
provisions for Chapter 13 plans.
11 U.S.C.S. § 1322. A Chapter 13
debtor must make his or her first
plan payment within 30 days after
the filing of the petition. 11 U.S.C.S.
§ 1326(a)(1). The failure to file a plan
is grounds for dismissal. 11 U.S.C.S. §
1307(c)(3).

Section 1325 sets forth the
confirmation requirements for
Chapter 13 plans. There is no right
to vote on a plan. Rather, parties in
interest have the right to object to
the plan (does not meet confirmation
standards or other general grounds).
11 U.S.C.S. § 1324; see also Fed.
R. Bankr. P. 3015.The confirmation
hearing must be held between 20
and 45 days after the Section 341
meeting of creditors but could be
held earlier if in the best interests of
creditors and there is no objection.
11 U.S.C.S. § 1324(b).

 

Financial Management Training Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:

11 U.S.C.S. §§ 727, 1328
Fed. R. Bankr. P. 1007, 4004

Related Content:

  • Individual Chapter 7 Timeline
  • Chapter 13 Timeline
  • Official Form B423, Certification
    About a Financial Management
    Course

Individual Chapter 7 debtors must
complete a financial management
course to obtain a discharge.
11 U.S.C.S. § 727(a)(11); Fed. R. Bankr.
P. 1007(b)(7)(A), 4004(c)(1)(H). The
debtor must complete the course
and file a certification with the court
within 60 days of the first date set for
the Section 341 meeting of creditors.
Fed. R. Bankr. P. 1007(c).

Individual Chapter 13 debtors must
complete a financial management
course to obtain a discharge.
11 U.S.C.S. § 1328(g); Fed. R. Bankr. P.
1007(b)(7)(A), 4004(c)(4). The debtor
must complete the course and file
a certification with the court before
making the last payment under the plan
or before filing a motion for a hardship
discharge (discussed below) under
Section 1328(b) of the Bankruptcy
Code. Fed. R. Bankr. P. 1007(c).

 

Discharge Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:

11 U.S.C.S. §§ 522, 523, 524, 727,
1328

Fed. R. Bankr. P. 4004

Related Content:
• Chapter 7 Liquidation
• Chapter 13 Bankruptcy

A Chapter 7 discharge is only available in
individual cases. Corporate Chapter 7 debtors
are not eligible to receive a discharge. 11
U.S.C.S. § 727(a)(1). A Chapter 7 discharge
is typically entered after 60 days after the
date first set for the Section 341 meeting
of creditors as set forth in Bankruptcy Rule
4004.

Section 727(a) lists the grounds which serve
as a basis for denial of a general Chapter 7
discharge, which include:

  • Transferring or concealing property of the
    debtor with the intent to hinder, delay, or
    defraud within one year before the petition
    date (11 U.S.C.S. § 727(a)(2)(A))
  • Transferring or concealing property of the
    estate with the intent to hinder, delay, or
    defraud after the petition date (11 U.S.C.S.
    § 727(a)(2)(A))
  • Failing to preserve financial records
    (11 U.S.C.S. § 727(a)(3))
  • Knowingly making a false oath or account
    (11 U.S.C.S. § 727(a)(4)(A))
  • Knowingly presenting a false claim
    (11 U.S.C.S. § 727(a)(4)(B))
  • Knowingly and fraudulently gave money for
    an action (11 U.S.C.S. § 727(a)(4)(C))
  • Knowingly and fraudulently withheld
    information from the court or the trustee
    (11 U.S.C.S. § 727(a)(4)(D))
  • Failing to explain any loss of assets
    (11 U.S.C.S. § 727(a)(5))
  • Refusing to obey any lawful order of the
    court (11 U.S.C.S. § 727(a)(6)(A))
  • Refusing to respond to a court approved
    question or testify (subject to certain
    exceptions) (11 U.S.C.S. § 727(a)(6)(B), (C)
  • Committing any of the previously listed
    acts in any prior bankruptcy case pending
    within one year of the current bankruptcy
    case (11 U.S.C.S. § 727(a)(7))
  • Receiving a prior Chapter 7 or 11 discharge within eight
    years of the petition date (11 U.S.C.S. § 727(a)(8))
  • Receiving a Chapter 12 or Chapter 13 discharge within six
    years of the petition date unless the payments in such cases
    totaled (1) 100% of the allowed unsecured claims or (2) 70%
    of the total unsecured claims and the plan was proposed
    in good faith and represented the debtor’s best effort
    (11 U.S.C.S. § 727(a)(9))
  • Executing a waiver of discharge and obtaining court
    approval of such waiver (11 U.S.C.S. § 727(a)(10))
  • Failing to complete a personal finance management course
    (subject to certain exceptions) (11 U.S.C.S. § 727(a)(11))
  • Finding by the court that there is reasonable cause to
    believe that Section 522(q) applies to the debtor and there
    is a proceeding where the debtor may be guilty of a felony
    specified in Section 522(q)(1)(A) or liable for a debt of the
    kind described in Section 522(q)(1)(B) (11 U.S.C.S. § 727(a)
    (12))

If one of these grounds exists and is timely asserted, the
debtor is denied a discharge of all debts.

Even if an individual debtor receives a general discharge,
certain debts may be excepted from the discharge. These
excepted debts remain due and owing as personal liabilities
of the debtor as if no bankruptcy occurred. Section 523(a)
enumerates the debts excepted from discharge and includes:

Certain taxes

  • Debts based on false pretenses, false representations, actual
    fraud, and false financial statements
  • Debts not scheduled by the debtor
  • Debts based on fraud as a fiduciary, larceny, or
    embezzlement
  • Debts based on fraud or defalcation while acting as a
    fiduciary
  • Domestic support obligations
  • Debts as a result of a willful or malicious injury

If one of these grounds exists and is timely asserted, the
debtor is denied a discharge of that particular debt.

In most cases, once the Chapter 13 debtor completes the
payments under the payment plan, the debtor receives a
discharge. 11 U.S.C.S. § 1328(a).

A discharge in Chapter 13 includes some debts that
cannot be discharged in a Chapter 7, including:

  • Long-term debts cured and maintained under Section
    1322(b)(5)
  • Debts to pay some nondischargeable tax obligations
  • Debts for restitution or criminal
    fines
  • Debts from malicious and willful tortious acts by the
    debtor that caused personal injury to an individual or the
    death of an individual
  • Certain post-petition debts under Section 1305(a)(2)

11 U.S.C.S. § 1328. A discharge will not be granted if the debtor
previously received a discharge:

  • In a case filed under Chapter 7, 11, or 12 of the Bankruptcy
    Code within the four-year period preceding the petition date
  • In a case filed under Chapter 13 Bankruptcy Code within the
    two-year period preceding the petition date

11 U.S.C.S. § 1328(f). A motion objecting to discharge under
Section 1328(f) must be filed no later than 60 days after the
first date set for the Section 341 meeting of creditors. Fed. R.
Bankr. P. 4004(a).

The debtor can qualify for a hardship discharge if:

  • The failure to make payments is due to circumstances for
    which the debtor should not justly be held accountable.
  • The value of property actually distributed on account of
    each allowed unsecured claim is not less than the amount
    that would have been paid in a Chapter 7.
  • Modification of the plan is not practicable.

11 U.S.C.S. § 1328(b).

A debtor will be denied a discharge upon a finding by the court
that there is reasonable cause to believe that Section 522(q)
applies to the debtor and there is a proceeding where the
debtor may be guilty of a felony specified in Section 522(q)(1)
(A) or liable for a debt of the kind described in Section 522(q)
(1)(B). 11 U.S.C.S. § 1328(h).

The debtor will not receive a discharge if the debtor has not
filed the financial management certification. Fed. R. Bankr. P.
4004(c)(4).

 

Revocation of Discharge Chapter 7 Chapter 13

Relevant Bankruptcy Code Sections /
Bankruptcy Rules:

11 U.S.C.S. §§ 727, 1328

Fed. R. Bankr. P. 9024

Related Content:

  • Chapter 7 Liquidation
  • Chapter 13 Bankruptcy

The Chapter 7 trustee, the U.S. Trustee, or a
creditor may seek to revoke the discharge by
commencing an adversary proceeding on the
following grounds:

  • The individual debtor obtained the
    discharge through fraud and the requesting
    party did not know of the fraud until after
    the discharge was granted.
  • The individual debtor acquired property of
    the estate or became entitled to acquire
    property that would be property of the
    estate, and knowingly and fraudulently
    failed to report the acquisition of or
    entitlement to the property or to deliver
    or surrender the property to the Chapter 7
    trustee.
  • The individual debtor committed an
    act specified in Section 727(a)(6) of the
    Bankruptcy Code (generally, failing to obey
    a court order or answer certain questions).
  • The individual debtor failed to explain a
    material misstatement in a bankruptcy audit
    or failed to make available all necessary
    papers or property that was requested in a
    bankruptcy audit.

11 U.S.C.S. § 727(d). The complaint to revoke
the discharge must be filed within one year
after granting of the discharge if the plaintiff is
asserting the ground that the individual debtor
obtained a discharge was through fraud under
Section 727(d)(1). 11 U.S.C.S. § 727(e)(1).

The plaintiff must seek revocation within one
year after granting of the discharge or by the
date the case is closed, whichever is later,
if the revocation is based on the individual
debtor fraudulently failing to report or deliver
property under Section 727(d)(2) or that the
individual debtor committed an act specified
in Section 727(a)(6). 11 U.S.C.S. § 727(e)(2).

On request of a party in interest
before one year after a discharge
is granted, and after notice and
a hearing, the court may revoke
the discharge if:

  • The discharge was obtained by
    fraud.
  • The requesting party did not
    know of such fraud until after
    the discharge was granted.

11 U.S.C.S. § 1328(e).

Advancing the Rule of Law in Consumer Bankruptcies

In counseling clients on the proper chapter to file for consumer bankruptcy, and in an effort to advance the rule of law, the transparency of law, and equitable access to legal remedies, attorneys should consider the following:

  • Have you effectively communicated the advantages and disadvantages of Chapter 7 and Chapter 13 petitions? More specifically, is that chapter choice aligned with your client’s long term goals of debt relief?
  • Do your client’s current priorities (i.e., saving their home, etc.) conflict with his or her long term goals of debt relief? If so, have you communicated this conflict to your client?
  • Would you make the same recommendations to this client if they had a different racial background?

For more information, see Chapter 7 Liquidation and Chapter 13 Bankruptcy. For additional resources, see Consumer Bankruptcy Resource Kit. 


Mark Haut is a Content Manager for Practical Guidance. Prior to joining Practical Guidance, he was counsel at Norton Rose Fulbright, where he advised clients on a variety of bankruptcy matters. Previously, he was an associate in the Bankruptcy and Reorganization Practice Group at Morgan, Lewis & Bockius, LLP. Prior to joining Morgan Lewis, he clerked for Judge Stuart M. Bernstein in the United States Bankruptcy Court for the Southern District of New York.


Emony M. Robertson is a third year law student at Howard University School of Law. Her time as a Robert S. Strauss Diversity & Inclusion Scholar at Akin Gump Strauss Hauer & Feld LLP, along with her participation in the Annual Duberstein Bankruptcy Competition, helped to clarify her interest in bankruptcy litigation. Emony’s LexisNexis Rule of Law Foundation Fellowship focused on reducing racial bias in consumer bankruptcy practices. Emony currently serves as the Captain of the Charles Hamilton Houston National Moot Court Team and a Student Attorney in the Investor Justice Education Clinic. After graduation in May 2022, she will clerk for Judge Craig Goldblatt in the United States Bankruptcy Court for the District of Delaware. 


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