Chapter 7 vs Chapter 13 bankruptcy: what's the difference, and how do you file?

What is bankruptcy, and how does it work?

Bankruptcy is a case in a federal bankruptcy court. It normally starts when you file a petition with the court, along with statements listing your property, income, debts and creditors. Bankruptcy law is federal law, so the same Bankruptcy Code applies in every state, and there is a bankruptcy court for each federal judicial district.

• The goal is a discharge. A discharge is a court order that says you do not have to pay most of your debts. Creditors may not try to collect a discharged debt in any way, including by phone calls and letters.U.S. Trustee Program · uscourts.gov
• A trustee runs the case. In Chapter 7 and Chapter 13, a trustee is appointed to oversee the case. Trustees are private parties appointed by the U.S. Trustee Program of the Department of Justice; in Alabama and North Carolina, bankruptcy administrators play that role. The trustee is not your lawyer and does not give you legal advice.U.S. Trustee Program · uscourts.gov
• You may never see a judge. A typical Chapter 7 filer does not appear in court unless someone objects; in Chapter 13 you may have to appear at a plan confirmation hearing. Usually the only formal proceeding you must attend is the meeting of creditors, informally called the "341 meeting".uscourts.gov

Chapter 7 vs Chapter 13 bankruptcy: the difference

Both chapters can stop most collection and end with a discharge of many debts. The big differences are what happens to your property and how long the case lasts:

Other chapters exist: Chapter 11 is used mostly by businesses, and Chapter 12 is only for family farmers and fishermen. If you file under Chapter 7, you may be able to change your case to another chapter later.

Who qualifies: the means test and other limits

Chapter 7 is available whatever the amount of your debts. But if you are an individual whose debts are mainly consumer debts, the court can dismiss a Chapter 7 case it finds abusive, and the means test decides whether abuse is presumed.

• Income at or below your state's median. You file Official Form 122A-1, which works out your current monthly income and compares it with the median income in your state. If your income is not above the median, you do not have to complete the second form.Form 2010 · uscourts.gov
• Income above the median. You also file the Chapter 7 Means Test Calculation (Official Form 122A-2). It deducts allowed living expenses and payments on certain debts from your income to see what could go to unsecured creditors. Depending on the result, the U.S. trustee or creditors can ask the court to dismiss your case. To avoid dismissal, you may choose another chapter; Chapter 13 is used by people who don't qualify for Chapter 7.Form 2010 · 11 U.S.C. § 707(b)
• Where the figures come from. The median income figures for your state and family size, and the IRS expense standards the forms use, are published on the U.S. Trustee Program's means testing page. They change from time to time, so use the set for the date you file.U.S. Trustee Program
• Chapter 13 has its own test. In Chapter 13, your income compared with your state's median decides the length of the plan (Official Form 122C-1). If your income meets certain thresholds, the means test calculation is the starting point for how much you must pay through the plan.U.S. Trustee Program · § 1322(d)
• Earlier cases. You cannot file at all if a case of yours was dismissed in the past 180 days because, for example, you willfully failed to appear before the court or comply with its orders. And you can only receive a Chapter 7 discharge once every eight years.11 U.S.C. § 109(g) · U.S. Trustee Program

Before you file: credit counseling

Every person who files for bankruptcy must first get credit counseling, with very limited exceptions. If it is not done before filing, the case could be dismissed.

• Within 180 days before you file. The briefing must come from a nonprofit budget and credit counseling agency approved by the U.S. Trustee Program, during the 180 days that end on the day you file. It goes over your options and your budget, and it is usually done by phone or online. If you file jointly, both spouses need it.11 U.S.C. § 109(h) · Form 2010
• Use the official list. Find an agency on the U.S. Trustee Program's list of approved agencies, which is organized by state and shows agencies offering other languages. The program does not recommend any particular agency. In Alabama and North Carolina, the bankruptcy administrators approve the agencies.U.S. Trustee Program · uscourts.gov
• Free or reduced fee if you can't pay. Agencies must provide the counseling without regard to your ability to pay. If your household income is less than 150 percent of the poverty level, you are presumed entitled to a fee waiver or reduction.U.S. Trustee Program
• Keep the certificate. The agency gives you a certificate, which you file with the court. If a debt repayment plan came out of the counseling, you file a copy of it too.FTC · uscourts.gov

How to file for bankruptcy, step by step

1. 1Take the credit counseling briefing. See credit counseling.
2. 2Gather your information. A list of all your creditors and what you owe each one, the source and amount of your income, a list of everything you own, and your monthly living expenses. If you are married, gather your spouse's information too, even if only one of you is filing.
3. 3Fill out the official forms. Individuals use the forms numbered in the 100 series. Start with the Voluntary Petition for Individuals Filing for Bankruptcy (Official Form 101), then the schedules of your property and debts, the statement of financial affairs and the means test form. The forms are free on uscourts.gov, and many courts also require local forms.
4. 4File with the right court. File in the bankruptcy court that serves the area where you live. Its website posts its local rules and other useful information.
5. 5Pay the fee, or ask to pay later. See what it costs. Not paying the fees can lead to dismissal of the case.
6. 6Send the trustee your documents. At least 7 days before the 341 meeting, your latest federal income tax return or a transcript. Usually at least 14 days before it, your photo ID, proof of your Social Security number, proof of current income such as your latest pay stub, and your bank and investment account statements. The court's notice tells you who your trustee is.
7. 7Go to the 341 meeting. See the 341 meeting.
8. 8Take the debtor education course. After you file, take a separate financial management course from an approved provider. Without it, you generally won't get a discharge.
9. 9Chapter 13: file your plan and start paying. File a repayment plan with the petition or within 14 days. Start plan payments to the trustee within 30 days after filing, even if the court has not approved the plan yet. The judge holds a confirmation hearing no later than 45 days after the meeting of creditors.
10. 10Receive the discharge. See after you file.

How much does it cost to file bankruptcy?

The court fees, as listed on the official notice for individuals filing for bankruptcy (Form 2010), are:

• Chapter 7: $338. A $245 filing fee, a $78 administrative fee and a $15 trustee surcharge.Form 2010 · Fee Schedule
• Chapter 13: $313. A $235 filing fee and a $78 administrative fee.Form 2010 · Fee Schedule
• Pay in installments. With Official Form 103A Application for Individuals to Pay the Filing Fee in Installments, you can ask to pay in up to four installments. You must propose to pay the entire fee no later than 120 days after you file; for cause, the court can allow up to 180 days. A married couple filing together pays one fee.Form 103A · Fed. R. Bankr. P. 1006
• Chapter 7 fee waiver. If your income is less than 150% of the poverty level and you are unable to pay the Chapter 7 fees even in installments, the court may waive them. Apply with Official Form 103B Application to Have the Chapter 7 Filing Fee Waived.28 U.S.C. § 1930(f) · Form 103B
• Lawyer and course fees. Attorney fees are extra. Lawyers who provide bankruptcy services must tell you in writing what services they will provide and what they cost. Counseling and debtor education providers must disclose their fees too, and must serve you even if you cannot pay.FTC · U.S. Trustee Program

What the automatic stay stops

The moment you file, an automatic stay takes effect; no judge has to order it. As long as the stay lasts, creditors generally may not start or continue lawsuits, wage garnishments or even phone calls demanding payment. The court notifies the creditors you list.

• What it covers. Most collection of debts from before the case: lawsuits and other proceedings, enforcing an earlier judgment, taking property, creating or enforcing liens, and any other act to collect a pre-bankruptcy debt.11 U.S.C. § 362(a)
• Garnishment and foreclosure. Filing stops wage garnishments, and it can stop a foreclosure. In Chapter 13 you can then bring missed mortgage payments current over a reasonable time, but you may still lose the home if the foreclosure sale was completed before you filed. See Wage garnishment.uscourts.gov
• Co-signers in Chapter 13. Unless the court allows it, a creditor may not try to collect a consumer debt from someone who is liable on it with you, which may protect a co-signer.11 U.S.C. § 1301 (uscourts.gov)
• What it does not stop. A criminal case against you. Family court cases to set or change support, or about custody, divorce or domestic violence (a divorce case still can't divide property that belongs to the bankruptcy estate). Collecting child support or alimony from property outside the bankruptcy, or by withholding wages under a support order. Other exceptions exist.11 U.S.C. § 362(b)
• It can be short. In some situations the stay lasts only a short time, and creditors can ask the court for relief from it, for example to recover property they hold a lien on.uscourts.gov

The 341 meeting of creditors: what happens

The meeting of creditors, also called the 341 meeting, is a required step in the bankruptcy process. It is not a court hearing, and there is no judge: the court may not attend. The trustee runs it, puts you under oath and asks about the papers you filed, and may ask about your property, debts, income and expenses. Creditors may join and ask questions too. You must attend even if no creditors come.

When

21 to 40 daysafter you file in Chapter 7; 21 to 50 days in Chapter 13

Where

On ZoomAlmost all are held by video. The meeting ID and passcode are in section 7 of your notice from the court.

Who asks

The trusteeThen any creditors who attend

Under oath

YesThe meeting is recorded

1. At least 14 days before

   Send the trustee clear copies of your photo ID and proof of your Social Security number, or a written statement that you have none, in a secure way. Never by unprotected email or messaging.

2. At least 7 days before

   Send your latest federal income tax return, or a transcript.

3. Before the meeting

   Test your device, its camera and microphone, and your internet connection. Have your filed schedules and statement of financial affairs and your original ID documents at hand.

4. 10 minutes early

   Join from a quiet place, alone unless your lawyer or a spouse who filed with you is with you. Enter your first and last name, keep your camera on, and wait in the virtual waiting room until your case is called.

5. The meeting

   The trustee swears you in, checks your ID and asks the required questions; then creditors may ask theirs. While you testify, don't communicate with anyone about your answers. If you and your lawyer need to talk, ask the trustee for a recess.

6. After

   The trustee concludes the meeting, or continues it to a later date, for example if your ID documents did not arrive or the connection failed. If you can't attend or get cut off, contact the trustee right away: missing the meeting can lead to dismissal of your case.

Video is the norm. The trustee may let you join by phone case by case if you truly can't connect by video, but will then likely reschedule the meeting to verify your identity.

Questions the trustee asks at the 341 meeting

The U.S. Trustee Program publishes the questions a Chapter 7 trustee must ask. The trustee may word them differently but must make sure you answer the substance of each one on the record. These are from that list:

• “State your name for the record. Is the address on the petition your current address?”
• “Did you sign the petition, schedules, statements, and related documents and is the signature your own?”
• “Did you read the petition, schedules, statements, and related documents before you signed them?”
• “To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct?”
• “Are there any errors or omissions to bring to my attention at this time?”
• “Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?”
• “Have you previously filed bankruptcy?”
• “Is the copy of the tax return you provided a true copy of the most recent tax return you filed?”
• “Do you have a domestic support obligation?”
• “Have you read the Bankruptcy Information Sheet provided by the United States Trustee?”

When relevant, trustees may also ask about:

• Real estate you own or have any interest in.
• Property you transferred or gave away in the past year.
• Large payments, over $600, to anyone in the past year.
• Money anyone owes you, and any claim you have against anyone.
• Your bank accounts and your car.

A Chapter 13 trustee also asks about the terms of your proposed plan.

In a Chapter 7 case the trustee must also make sure you know how bankruptcy can affect your credit history, that you can file under a different chapter, what a discharge does, and what reaffirming a debt means.

How to answer the trustee: short, true and complete

There is no script to learn. Listen to the whole question, answer only that question, and stop. Keep your filed papers in front of you. If you don't know or don't remember, say so instead of guessing, and offer to find the record.

Which debts bankruptcy does not wipe out

A discharge covers most debts, but some debts are not discharged under the law. Even after a Chapter 7 discharge, you may still have to pay:

• Most taxes.
• Child support and alimony (domestic support obligations), and property settlement obligations from a divorce.
• Most student loans, unless you can prove that repaying them would impose an undue hardship on you and your dependents.
• Most fines, penalties and criminal restitution.
• Debts for death or personal injury caused by driving while intoxicated from alcohol or drugs.
• Certain debts that you did not list in your bankruptcy papers.

Debts from fraud, theft or injuries you caused on purpose can also survive; for fraud debts, generally only if the creditor files a timely action in the bankruptcy court and wins. A Chapter 13 discharge is somewhat broader: it can also cover, for example, debts from property settlements in a divorce.

• Liens survive. A discharge ends your personal duty to pay, but it does not remove a lien on property. If you stop paying the bank that holds the mortgage on your house or a lien on your car, it can still take the property.U.S. Trustee Program · uscourts.gov
• Reaffirmation is voluntary. To keep a car, for example, you may sign a reaffirmation agreement promising to pay a debt anyway. No law requires it. You can cancel it before the discharge or within 60 days after it is filed with the court, whichever gives you the most time. If you have no lawyer, the court must hold a hearing to decide whether to approve it.U.S. Trustee Program
• Paying anyway is your choice. No one can make you pay a discharged debt, but you can voluntarily pay any debt you wish to pay.U.S. Trustee Program

Keeping your property: exemptions and state law

Exemptions protect property from your creditors. They may let you keep your home, a car, clothing and household items, or receive some of the money if the property is sold. Exemptions are not automatic: you list what you claim on Schedule C: The Property You Claim as Exempt (Official Form 106C). If you do not list the property, the trustee may sell it.

• Federal or state exemptions. The Bankruptcy Code has a federal list of exemptions, but it lets each state adopt its own exemption law in its place, and many states have. Elsewhere, you choose between the federal package and your state's exemptions. Whether you can keep a given item is often a question of state law, and each state has its own rules about the amount and type of property.11 U.S.C. § 522(b) · uscourts.gov · FTC
• Which state. Generally the state where you lived for the 730 days before you file. If you did not live in a single state for that whole time, an earlier home may decide it.11 U.S.C. § 522(b)(3)(A)
• Retirement savings. Retirement funds in a tax-exempt retirement fund or account can be exempted under both the federal and the state option.11 U.S.C. § 522(b)(3)(C), (d)(12)
• The means test uses your state too. It compares your income with the median income for your state and family size. See who qualifies.Form 2010

After you file: the discharge, and your credit

• Debtor education first. In Chapter 7 and in Chapter 13, the court generally won't grant a discharge unless you complete an approved course in personal financial management after filing. If you filed jointly, both spouses must complete it.11 U.S.C. §§ 727(a)(11), 1328(g) · Form 2010
• When the discharge comes. In Chapter 7, usually about four months after you file, unless someone objects. In Chapter 13, as soon as practicable after you complete all payments under the plan. The court mails the discharge order to your creditors, and you receive a copy.uscourts.gov
• If a creditor keeps collecting. Creditors may not collect a discharged debt. If one tries, you can file a motion asking the court to reopen your case to deal with it, and the creditor can be sanctioned.uscourts.gov
• Your credit report. A bankruptcy may be reported on your credit record for as long as ten years, and the FTC says bankruptcy information stays on your credit report for 10 years. That can make it hard to get credit. Bankruptcy courts do not report to credit bureaus, but bankruptcy filings are public records. A bankruptcy you never filed on your report? See Identity theft.U.S. Trustee Program · FTC · uscourts.gov
• Your job. A government agency or private employer may not discriminate against you in employment solely because you filed for bankruptcy or did not pay a discharged debt.uscourts.gov

Can you file bankruptcy without a lawyer?

Yes. Filing without a lawyer is called filing pro se, and the law allows it. But the federal courts strongly recommend the advice of a qualified attorney, because bankruptcy has long-term financial and legal outcomes and the rules are technical. If you file without one, you are still responsible for knowing and following all the legal requirements, and court employees and judges are prohibited by law from giving legal advice.

Pro se filers are expected to follow the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the local rules of their court. A lawyer can advise you on whether to file, which chapter to use, whether your debts can be discharged, and whether you will be able to keep your home, car or other property.

• What a petition preparer may do. A non-lawyer bankruptcy petition preparer may only type information you supply into the forms. Preparers may advertise as "document preparation services", but not as legal services.uscourts.gov · U.S. Trustee Program
• What a preparer may not do. Give legal advice of any kind, such as whether to file, which chapter is right, whether your debts will be discharged, whether you can keep your home or car, or which property is exempt. A preparer cannot sign documents for you, help you in bankruptcy court, or take payment for the court fees.Official Form 119 · 11 U.S.C. § 110
• What a preparer must do. Give you a notice (Official Form 119) to sign before preparing any document or accepting any fee, sign every document they prepare, and give you a copy of all of them.Official Form 119 · uscourts.gov

Bankruptcy scams, and how to report fraud

• Foreclosure rescue schemes. Operators contact homeowners whose homes are listed in foreclosure notices, promise to renegotiate the mortgage, and collect the mortgage payments or a monthly fee. Some file a bankruptcy petition in the homeowner's name. The scheme does not save the home, and it leaves a bankruptcy filing on your credit record. Tell a U.S. Trustee field office immediately.U.S. Trustee Program
• Promises to hide a bankruptcy. A company that promises to create a new credit identity or hide a bankruptcy from your credit history is running a scam. If you use a number other than your own to apply for credit, you could face fines or prison.FTC
• Help that charges first. The FTC warns about credit counselors who promise to fix all your problems or charge you a lot of money before doing anything. The U.S. Trustee Program keeps the list of approved pre-bankruptcy counseling agencies, but doesn't endorse any of them.FTC
• Report bankruptcy fraud. Send a written summary to the U.S. Trustee Program at USTP.Bankruptcy.Fraud@usdoj.gov, or to a local U.S. Trustee office: the case name and number, where it was filed, what was concealed and how you know. You don't have to give your name.U.S. Trustee Program

Free help, and when to get a lawyer

The bankruptcy court clerk and the U.S. Trustee Program are prohibited from giving legal advice, but you can get free or low-cost help:

• Legal aid. If you are unable to afford an attorney, you may qualify for free legal services. The Legal Services Corporation funds civil legal aid for low-income people in every state, the District of Columbia and the U.S. territories.uscourts.gov · lsc.gov
• The court clerk and the state bar. Your bankruptcy court's clerk or your state bar association may know of people or organizations offering bankruptcy help for free or for a reduced fee.U.S. Trustee Program
• A complaint about your trustee. Contact a U.S. Trustee Program field office. You will be asked to make a written complaint.U.S. Trustee Program

Because a Chapter 7 discharge is subject to many exceptions, the federal courts suggest consulting competent legal counsel before filing to discuss the scope of the discharge.

Common questions

Official sources

1. U.S. Courts, Bankruptcy Basics: Process (title 11, the trustee, the 341 meeting, the chapters) uscourts.gov
2. U.S. Courts, Bankruptcy Basics: Chapter 7 (means test, fees, automatic stay, meeting of creditors, discharge) uscourts.gov
3. U.S. Courts, Bankruptcy Basics: Chapter 13 (eligibility, plan length, meeting of creditors, confirmation) uscourts.gov
4. U.S. Courts, Bankruptcy Basics: Discharge in Bankruptcy uscourts.gov
5. U.S. Courts: Bankruptcy Basics uscourts.gov
6. U.S. Courts: Bankruptcy Cases uscourts.gov
7. U.S. Courts: Filing Without an Attorney (pro se, petition preparers) uscourts.gov
8. U.S. Courts: Credit Counseling and Debtor Education Courses uscourts.gov
9. U.S. Courts: Bankruptcy Case Records and Credit Reporting uscourts.gov
10. U.S. Courts: Bankruptcy Court Miscellaneous Fee Schedule (effective December 1, 2023) uscourts.gov
11. Official Form 2010: Notice Required by 11 U.S.C. § 342(b) for Individuals Filing for Bankruptcy (fees, means test, warnings) (PDF) uscourts.gov
12. Official Form 103A: Application for Individuals to Pay the Filing Fee in Installments (PDF) uscourts.gov
13. Official Form 103B: Application to Have the Chapter 7 Filing Fee Waived (PDF) uscourts.gov
14. Official Form 119: Bankruptcy Petition Preparer's Notice, Declaration, and Signature (PDF) uscourts.gov
15. U.S. Trustee Program: Section 341 Meeting of Creditors justice.gov
16. U.S. Trustee Program: Best Practices for Attending Virtual § 341(a) Meetings of Creditors (PDF, 08/25/2023) justice.gov
17. U.S. Trustee Program: Section 341(a) Meeting of Creditors, Required Statements/Questions and Sample General Questions (PDF) justice.gov
18. U.S. Trustee Program: Handbook for Chapter 7 Trustees (the oath, conducting the meeting) (PDF) justice.gov
19. U.S. Trustee Program: Bankruptcy Information Sheet justice.gov
20. U.S. Trustee Program: Credit Counseling and Debtor Education Information justice.gov
21. U.S. Trustee Program: FAQs, Credit Counseling justice.gov
22. U.S. Trustee Program: FAQs, Debtor Education justice.gov
23. U.S. Trustee Program: Means Testing (Census median income and IRS data) justice.gov
24. U.S. Trustee Program: FAQs, Consumer Information (petition preparers, legal help, foreclosure rescue schemes) justice.gov
25. U.S. Trustee Program: Chapter 7, 12 and 13 Private Trustee Locator justice.gov
26. U.S. Trustee Program: Report Suspected Bankruptcy Fraud justice.gov
27. 11 U.S.C. § 109: who may be a debtor (credit counseling, § 109(h); Chapter 13 debt limits, § 109(e)) govinfo.gov
28. 11 U.S.C. § 110: penalty for persons who negligently or fraudulently prepare bankruptcy petitions govinfo.gov
29. 11 U.S.C. § 341: meetings of creditors govinfo.gov
30. 11 U.S.C. § 343: examination of the debtor govinfo.gov
31. 11 U.S.C. § 362: automatic stay govinfo.gov
32. 11 U.S.C. § 522: exemptions govinfo.gov
33. 11 U.S.C. § 523: exceptions to discharge govinfo.gov
34. 11 U.S.C. § 727: discharge (Chapter 7) govinfo.gov
35. 11 U.S.C. § 1322: contents of a Chapter 13 plan (plan length, § 1322(d)) govinfo.gov
36. 11 U.S.C. § 1328: discharge (Chapter 13) govinfo.gov
37. Federal Trade Commission: How To Get Out of Debt (bankruptcy, credit counseling, debt settlement, credit repair scams) ftc.gov
38. Legal Services Corporation: I Need Legal Help lsc.gov

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