Key Features Chapter 7 – Debt LiquidationChapter 13 – Re-Payment Plan
EligibilityDebtor must pass the Means Test. The threshold for filing Chapter 7 is median income – debtors with less than median income presumptively qualify. Debtors with above median income have to complete the Means Test. See Means Test Calculations.Individual debtors, including self-employed or operating unincorporated business, must have regular income and must have unsecured debts less than $383,175 and secured debts less than $1,149,525. See Chapter 13 Eligibility.
Filing Frequency

 

See Discharge

Chapter 7 discharge can be obtained every 8 years.Chapter 13 discharge can be obtained every 2 years.
Automatic StayA creditors can proceed against a co-debtor for collection of the debt.“Co-debtor stay” prevents a creditor from pursuing a co-debtor on a consumer debt.
Treatment of Secured DebtsTo keep property securing the debt (house, car, etc.), debtors have to redeem the property by paying off its current value or re-affirm the debt the property secures. See Reaffirmation Agreements and Alternatives to Re-Affirmation.To keep property securing the debt, debtors have to stay current with a Chapter 13 Plan. See Treatment of Secured Creditors in Chapter 13. Secured debts must be paid in full.
Treatment of Unsecured DebtsMost of unsecured debts are wiped out in Chapter 7 bankruptcy. See Non-Dischargeable Debts.Debtors must commit all disposable income to the plan. Unsecured creditors are paid a portion of the debt (at least what they would have received in Chapter 7) and the rest of it is discharged at the end of the re-payment period.
Treatment of Debtor’s PropertyDebtor must surrender non-exempt assets to the trustee for liquidation and distribution to creditors. See Distribution of Estate Property. To keep non-exempt property, debtor may buy it back from the trustee by paying the non-exempt amount.Debtor can keep non-exempt property by re-paying the Trustee over a 3 to 5 year time period its value.
ForeclosureDebtor cannot cure the past due arrearages over time, but may be able to negotiate the terms of the re-affirmation agreement.Debtor can stop the foreclosure and can cure the past due arrearages over a period of up to 60 months. Debtor may even be able to strip second mortgages or liens that exceed the value of the property rendering them unsecured debt.
DischargeDebtor can receive a discharge 3-5 months after filing.Debtor can receive a discharge upon completion of the plan (3-5 years).

See also: