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Robert N Zimmerman, Jr.
(813) 655-4900                                           
1106 N Parsons Ave., Ste 202                                                                                        
Brandon, FL 33511



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        Robert N. Zimmerman, Jr. (813) 655-4900
                                                                             

The Most Basic Difference:
Chapter 7 is a liquidation
Chapter 13 is a repayment plan

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Bankruptcy Chapter 7 Chapter 13

.                             Basic Differences between Chapter 7 and Chapter 13

In brief, a Chapter 7 is a liquidation type of bankruptcy and a Chapter 13 is a repayment, in whole or in part, over time, including repayment of past payments that were missed such as missed mortgage payments.
                   
A Chapter 7 liquidation means the non-exempt assets will be sold. Consequently an individual considering bankruptcy will need to know what assets are likely to be sold. We compare the value and type of asset to the exemptions permitted under applicable law. There is a page on this site covering Florida exemptions.

Sometimes, an individual has no assets or can exempt all the assets that they own. We call this a 'no assets case'. If the individual is successful at exempting all the assets they own then no assets will be liquidated in the Chapter 7 process.
 
Even if an individual can not exempt all of their assets a Chapter 7 trustee might arrange to sell the non-exempt assets to the Debtor rather than at a public or other private sale.

If the individual has non-exempt assets and can not or will not buy them back from the bankruptcy estate, a Chapter 7 may still be beneficial. In this case, the author would look to the value and nature of the assets in relation to the debt expected to be discharged. If enough debt is being discharged, it may be worth parting with some assets. A Chapter 7 bankruptcy is usually completed much sooner than a Chapter 13.  


Chapter 13 requires a debtor to propose a repayment plan. How much has to be paid is obviously an important consideration. The Chapter 13 Means Test immediately comes to mind and we do have a page on this site regarding the Means Test. At this point, it is important to note that the Chapter 13 Means Test will calculate an individual's disposable income. It will also state how long the individual should make payments into the plan.

The disposable income as calculated by the Means Test represents the amount of money that should be paid into the Chapter 13 plan for the benefit of the unsecured creditors each month. However, the unsecured creditors are to be paid and amount that is at least equal to what they would have been paid in a Chapter 7. This means that the Debtor must pay the unsecured creditors the greater of their disposable income as calculated by the means test or the value of their non-exempt assets.

As a side note, When individuals have non-exempt assets that they want to keep but can not buy them back then a Chapter 13 should be considered. In Chapter 13 the individual would have a much longer time to pay the non-exempt amount. Trying to buy the assets from a Chapter 7 Trustee is not a sure thing and even if the Chapter 7 Trustee is willing to sell the assets to the Debtor the Trustee will likely want to be paid in a short period of time.

A Chapter 13 Bankruptcy also makes some options available to a debtor that may not be available or feasible in a Chapter 7. One example is lien stripping. Another would be curing a defaulted loan, such as allowing a debtor to bring their mortgage current.

 

The author of this website is a lawyer licensed to practice in the state of Florida and the U.S. District Court, Middle District of Florida. It is against the law and unethical to provide legal advice or otherwise practice law in a venue where the attorney is not licensed. All of the bankruptcy information contained in this website is provided for educational purposes only. Please bear in mind that state law effects bankruptcy issues. General education helps people understand bankruptcy but it is not a substitute for legal advice by a competent attorney licensed in the state and the Court where a person files bankruptcy. Further, not all Bankruptcy Courts interpret the U.S. Bankruptcy Code the same way. Consequently, counsel familiar with the court that the petition is filed in is very important. 


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