Chapter 7 vs. Chapter 13: An In-Depth Comparison

Why the Distinction Matters for BPPs

Chapter 7 and Chapter 13 are the two most common forms of consumer bankruptcy. From a document preparation standpoint, they are meaningfully different. The forms overlap, but the additional documents, the timelines, and the complexity of intake all shift based on which chapter applies.

As a BPP, you do not determine which chapter a consumer should file. The consumer makes that decision, ideally with the guidance of a bankruptcy attorney. What you must understand is how to adapt your document workflow once that decision has been made. This module covers the operational differences between the two chapters so you can serve clients accurately regardless of which path they are on.

Chapter 7: Liquidation Basics

Chapter 7 is a liquidation proceeding. The consumer discloses all assets and all debts. A court-appointed trustee reviews the case to determine whether any non-exempt assets can be sold to pay creditors. Most consumer Chapter 7 cases are no-asset cases, meaning the trustee finds nothing to distribute. At the end of the process, eligible unsecured debts are discharged.

Timeline

From filing to discharge, a Chapter 7 case typically takes 4 to 6 months. The consumer attends a 341 Meeting of Creditors roughly 30 days after filing. Absent complications, the discharge follows approximately 60 days after that meeting. As a BPP, the relatively compact timeline means your document packet must be complete and accurate at filing, with no expectation of revisions after submission.

Means Test Role

The means test is an income-based eligibility calculation required for Chapter 7 filings. It uses the consumer's average monthly income over the six months before filing and compares it to the median income for their state and household size. Consumers whose income falls below the median generally qualify for Chapter 7. Consumers above the median must complete a longer calculation to determine eligibility.

From an intake standpoint, the means test requires specific income documentation. Collecting that documentation accurately is part of your workflow. Interpreting whether the consumer passes or fails is not.

Key Documents for Chapter 7

• Recent pay stubs covering at least two months
• Six months of income records from all sources
• Last two years of federal tax returns
• Bank statements for all accounts, typically three to six months
• Complete creditor list with names, addresses, and current balances
• Asset inventory: real property, vehicles, financial accounts, personal property of value

Common Chapter 7 Clients

• Wage earners with primarily unsecured debt: credit cards, medical bills, personal loans
• Individuals facing active wage garnishments or collection actions
• Consumers whose income is at or below state median for their household size

Chapter 13: Reorganization Basics

Chapter 13 is a reorganization proceeding. Instead of liquidating assets, the consumer proposes a repayment plan that distributes income to creditors over 3 to 5 years. At the completion of the plan, remaining eligible unsecured debts are discharged. The consumer must have regular income to fund the plan.

Timeline

Chapter 13 cases run 3 to 5 years. The repayment plan length depends on the consumer's income relative to state median: above-median income generally requires a 5-year plan, below-median may qualify for a 3-year plan. The consumer makes monthly plan payments to the trustee throughout this period. From an intake standpoint, this extended timeline means your document packet must account for ongoing monthly obligations, not just a snapshot of current debt.

Repayment Plan Overview

The Chapter 13 plan specifies how much the consumer will pay each month and how those payments will be distributed among creditors. Priority debts (such as certain taxes and domestic support obligations) are paid first. Secured debts on property the consumer wants to keep must be addressed. Whatever remains goes to unsecured creditors.

What drives the plan numbers is a combination of the consumer's disposable income, the value of their non-exempt assets, and the types of debts involved. Calculating or advising on those numbers is attorney work. Your role is to gather the documents that feed into that calculation accurately.

Additional Documents Required for Chapter 13

Chapter 13 requires everything in the Chapter 7 document list, plus the following:

• Mortgage statements for all real property, including current balance and payment amount
• Vehicle loan statements showing current balance, payment, and lender information
• Property tax records for all real property owned
• Homeowner and vehicle insurance documents
• Proof of regular income covering the full six months before filing
• Documentation of any domestic support obligations (child support, alimony)

Why Chapter 13 Intake Is More Complex

Chapter 13 cases involve more documents, more moving parts, and a longer consumer relationship. The repayment plan form itself requires detailed information about secured debts, priority claims, and projected income over years. Missing a single document at intake can delay plan confirmation. When a consumer tells you they are filing Chapter 13, budget significantly more time for intake and document review than you would for a Chapter 7 case.

Means Test: What a BPP Needs to Know

The means test determines whether a consumer qualifies for Chapter 7 relief. It compares the consumer's average monthly income (calculated over the six months before the filing date) to the median income for their state and household size. If income is at or below median, the consumer generally qualifies. If income is above median, a second calculation is required.

Forms B122A-1 and B122A-2

Form B122A-1 (Statement of Your Monthly Income) captures the consumer's income over the applicable six-month period. Every Chapter 7 filer completes this form. Form B122A-2 (Means Test Calculation) is completed only by consumers whose income exceeds the state median. It applies a series of deductions to determine whether the consumer has sufficient disposable income to repay debts.

Completing these forms requires accurate income data. Calculating or interpreting them requires legal judgment. Understand the distinction clearly.

BPP Role on Means Test Intake

• Collect all income documentation for the six months before the filing date
• Organize pay stubs and other income records by month
• Note the applicable six-month period clearly in the client file
• Transfer the income figures accurately to Form B122A-1 as directed by the consumer
• Do NOT perform the means test calculation
• Do NOT advise the consumer on whether they qualify for Chapter 7
• Do NOT interpret what the numbers mean or tell the consumer what to expect

Escalation Trigger

Document Differences: Chapter 7 vs. Chapter 13 Checklist

Use this breakdown to structure your intake checklist based on the chapter the consumer is filing.

Documents Required for Both Chapters

• Government-issued photo ID
• Social Security card or proof of Social Security number
• Last two years of federal (and state, if applicable) tax returns
• Six months of pay stubs or other proof of income from all sources
• Three to six months of bank statements for all accounts
• Complete creditor list: names, addresses, account numbers, and balances
• Lease or rental agreement (if renting)
• Utility bills or other proof of current address

Additional Documents for Chapter 13 Only

• Mortgage statements for all real property (current balance, payment amount, lender name and address)
• Vehicle loan statements (current balance, payment amount, lender name and address)
• Property tax bills or tax assessment records for all real property
• Homeowner and vehicle insurance declarations pages
• Documentation of domestic support obligations (court orders for child support or alimony)
• Profit and loss statements if the consumer has any self-employment income

How to Structure Your Intake Checklist

Maintain two versions of your intake checklist: a base version for Chapter 7 cases and an expanded version for Chapter 13 cases. When a consumer tells you which chapter they are filing, pull the correct checklist. If the consumer changes their filing decision midway through intake, update the checklist and request any missing documents before proceeding with preparation.

Common Client Questions (and How to Respond)

Clients often ask questions that cross into legal advice territory. The following are the most common questions BPPs encounter when working on Chapter 7 and Chapter 13 cases, along with the correct response.

Compliance Notes

No Chapter Recommendations, Ever

A BPP may not recommend, suggest, or imply which chapter a consumer should file. This applies regardless of how obvious the answer might seem, how much pressure the consumer applies, or how clear the consumer's financial situation appears. Chapter selection is a legal determination. It requires understanding exemptions, asset values, income projections, and legal strategy. None of those are within the BPP scope.

Document Differences Are Operational Knowledge

Understanding that Chapter 13 requires mortgage statements and Chapter 7 does not is operational knowledge. It tells you what to collect, not what to advise. Knowing the difference between chapters at a document level is entirely appropriate for a BPP. Using that knowledge to steer a consumer toward one chapter is not.

Escalation Situations

• Consumer applies pressure for you to recommend a chapter: stop, explain your role, and refer to an attorney. Document the conversation.
• Consumer presents unclear income or asset information that you cannot reconcile from source documents: do not estimate or interpret. Request clarification, and if unclear after that, refer to an attorney before proceeding.
• Consumer discloses business debts or business ownership: business bankruptcy cases involve additional complexity. Refer to an attorney before accepting the engagement.

Module 2 — Knowledge Check

Take a few minutes to reflect on the following questions before moving to Module 3. No answers are provided here. Review the relevant sections above if you are uncertain about any item.