Bankruptcy Process; Chapter 13 Vs Chapter 7

  • Bankruptcy Process; Chapter 13 Vs Chapter 7

Bankruptcy Process; Chapter 13 Vs Chapter 7

Call: 888-297-6203

The bankruptcy process can be broadly classified based on the chapter you choose. We list some of the steps or procedures which you may come across while filing bankruptcy under the respective chapters below. This might not be an all-inclusive list. Bankruptcy is a very vast subject, and it needs loads of information from experts. Find all the bankruptcy-related information on

How does a Chapter 7 bankruptcy work?

Chapter 7 bankruptcy is often referred to as the ‘liquidation chapter’ as it deals with the liquidation of assets to settle the debts of the lenders. The overall time duration to settle a chapter 7 bankruptcy case would be around 90 days. You need to qualify for chapter 7 by pursuing the means test. Despite being termed as a ‘liquidation chapter’ by proper use of exemptions, one can easily preserve basic assets and more. However, the drawback is that the scars of bankruptcy often remain on the credit score for as long as 10 years.

The process for filing chapter 7 bankruptcy in a brief goes as follows-

  1. A petition needs to be filed with the bankruptcy court indicating chapter 7 with the required statements, schedules, and supporting documents
  2. Filing fees, administrative fees, and a trustee surcharge of $245, $75, and $15 respectively need to be paid
  3. Attending the lender’s meet schedule approximately 30 days after the bankruptcy petition is filed
  4. Make attempts to safeguard your assets before the debts are discharged. It is important to negotiate or indicate an intention to continue the debt or withhold the asset before the bankruptcy trustee liquidates it to settle the lenders
  5. Avail the discharge and try to improve your credit score over a period to ensure the scars of chapter 7 bankruptcy are not hindering future progress

How does a Chapter 13 bankruptcy work?

Chapter 13 bankruptcy helps in safeguarding all assets and setting up a restructured payment plan to ensure some or most of the debt is paid out over a period of 3-5 years. As it heavily relies on future income, the filer is expected to have a reasonably consistent source of income to fulfill the future payment plans as realized through chapter 13 bankruptcy. As the payment plan stretches for up to 5 years, this chapter is more time-consuming compared chapter 7. Also, unlike chapter 7, the chapter isn’t available for businesses. The scars of chapter 13 bankruptcy remain on the credit score for about 7 years however, the damage is lower compared to chapter 7 bankruptcy.

The process for filing a chapter 13 bankruptcy goes as follows-

  1. The petition process remains the same for chapter 13 as well just an additional re-payment plan must be added to it. This plan should be viable and transparent and should accommodate all the non-negotiable debts and should prioritize debts in the right order
  2. Like chapter 7 the fees for filing and administration of $235 and $75 respectively need to be paid. There is no trustee surcharge here but there can be some handling and payment charges on every month payments that the filer makes to the trustee as per the agreed repayment plan
  3. The trustee might request some additional documents to verify and assert the net household income
  4. Attending the meeting with the lenders to ensure the questions relating to the proposed repayment plan can be addressed
  5. Once the bankruptcy court approves the repayment plan, make sure to make consistent payments as per the plan within 30 days of filing
  6. The unsecured debts or the debts to be discharged are discharged once the repayment plan is completed. To avail of the discharge, it is essential that the filer has complied with all the payments and terms as per the repayment plan approved by the bankruptcy court.

Managing bankruptcy on your own vs an attorney

Hiring an attorney is the right choice for your bankruptcy filing concerns. The reasons are very clear and practical and can be listed as follows-

  1. There is a need to think calmly and process the clauses, claims, and information which can be very difficult in a stressful situation calling for bankruptcy. An experienced bankruptcy from Los Angeles & Dallas, TX can help in handling the situation in a more professional and calm way
  2. Any negotiation or unreasonable claim from lenders or bankruptcy trustees can be prevented professionally by an attorney
  3. In case of emergency or in case of any hearings requiring a physical presence, the attorney can attend as a proxy on your behalf. It saves overall hassle and unnecessary travel for the filer
  4. Any mistake in the filing of bankruptcy docs can result in losing an asset, unfavorable settlements, additional payouts, exposure to fraud or perjury, and what not. An experienced attorney can minimize the chances of these lapses
  5. An experienced attorney who is also available at 888-297-6203 will utilize the maximum exemptions and help in making the bankruptcy as favorable as possible for the filer