Chapter 7 vs. Chapter 13: framing the intake conversation

Chapter 7 is a liquidation. A trustee is appointed, nonexempt property is administered for the benefit of creditors, and in a routine no-asset consumer case the discharge enters a few months after filing. Chapter 13 is a rehabilitation. The debtor commits disposable income to a plan running three to five years, the plan is confirmed by the court, a standing trustee collects and distributes the payments, and the discharge comes at the end on completion. Almost every practical difference clients ask about — keeping a house behind on payments, keeping a nonexempt asset, dealing with tax debt, a prior filing — follows from that one structural distinction.

This article is written for the people running intake, and the framing matters. Choosing a chapter is legal judgment reserved to the attorney; a paralegal or intake coordinator who tells a caller which chapter to file is practicing law. What intake owns is the fact record — complete, dated, and verified — that makes the attorney’s decision possible on the first pass rather than the third. Nearly every converted or dismissed case traces back to a fact that was available at intake and never captured.

The structural differences

The eligibility gates

The two chapters are gated differently, and the gates are not symmetrical. Chapter 7 turns on a formula; Chapter 13 turns on arithmetic the debtor has to sustain for years.

Chapter 7: the means test

For an individual whose debts are primarily consumer debts, §707(b) allows dismissal or conversion where granting relief would be an abuse, and §707(b)(2) creates a presumption of abuse driven by a calculation on Official Forms 122A-1 and, where required, 122A-2. Current monthly income is defined in §101(10A) as the average monthly income from all sources during the six-month period ending on the last day of the calendar month before the filing month — a lookback that makes the intended filing month itself a variable. Form 122A-1Supp handles the statutory exclusions, including the ones for certain disabled veterans and for qualifying reservists and National Guard members. The median-income figures and standardized expense allowances change on a published schedule; always pull the current tables from the United States Trustee Program rather than reusing a spreadsheet. Our walkthrough of the means test forms covers the calculation itself.

Chapter 13: regular income and debt limits

Section 109(e) limits Chapter 13 to an individual with regular income who, on the filing date, owes noncontingent, liquidated debts below the statutory ceilings, stated separately for unsecured and secured debt. Two points matter operationally. First, the amounts are adjusted periodically under §104 and have also been the subject of temporary legislation, so never quote a figure from memory — check the current amounts published by the courts at uscourts.gov. Second, the test turns on characterization as much as on totals: contingent and unliquidated debts are excluded, and whether a disputed guaranty, a pending lawsuit, or an undersecured mortgage counts — and in which column — is a legal question that a clean schedule of debts lets the attorney answer quickly.

Prior discharges

A prior case can bar the discharge without barring the filing. The periods below run from filing date to filing date, not from the date of the earlier discharge, which is the detail intake most often gets backwards. Capture case numbers, districts, chapters, filing dates, and discharge dates for every prior case — including cases that were dismissed, which affect the automatic stay in the new case under §362(c)(3).

Fact patterns that pull toward Chapter 13

• Mortgage arrears the client wants to cure. Chapter 7 discharges the personal obligation but does nothing about a default; the lender can proceed once the stay lifts. Section 1322(b)(5) lets a plan cure the arrearage over time while ongoing payments are maintained. Capture the exact arrearage, the lender, and the foreclosure posture including any sale date.
• Nonexempt equity the client is unwilling to lose. A paid-off vehicle, a second property, a tax refund, an inheritance, or a personal injury claim that exemptions do not cover is estate property in Chapter 7. Chapter 13 can preserve it by paying its value through the plan.
• Income at or above the applicable median. An above-median result does not settle anything on its own, but it moves the case into the full means test calculation and makes the Chapter 13 analysis live.
• A prior discharge inside the Chapter 7 window. A discharge in a case filed less than eight years ago closes the door under §727(a)(8) while Chapter 13 may still be available, with or without a discharge at the end.
• Priority tax debt or domestic support arrears. Debts that survive a Chapter 7 discharge can be paid in structured plan payments under the protection of the stay.
• A vehicle purchased outside the statutory lookback. Whether a secured claim can be modified depends in part on when the collateral was acquired — §1325(a) treats a purchase-money vehicle bought for personal use within 910 days of filing, and other collateral acquired within one year, differently from older debt. Record purchase dates, not just balances.
• A codebtor on consumer debt. The §1301 codebtor stay is often the reason a client cares which chapter is filed.

Fact patterns that point toward Chapter 7

• Income below the applicable median with unsecured debt and no meaningful nonexempt equity.
• No secured debt the client wants to keep, or collateral that is current and adequately protected by the exemption scheme.
• Income that is genuinely too unstable to support a multi-year plan, where a confirmed Chapter 13 would likely fail.
• A short, clean case where speed to discharge is the client’s actual objective.

What intake has to capture for the call to be possible

The chapter decision is only as good as the record it rests on. A well-built client intake form collects all of the following without the attorney having to ask twice:

• Six full months of income, by source, for everyone in the household — including a non-filing spouse. The means test runs on the six calendar months preceding the filing month, so pay stubs need dates, not estimates.
• Household size and composition, including dependents who do not live in the home full time.
• Actual monthly expenses at the level of detail Schedules I and J require, with the documentation behind the unusual line items. Our guide to Schedules I and J covers the distinction between scheduled expenses and the standardized figures the means test uses.
• Every secured debt with its collateral, balance, arrearage, purchase date, and current payment status. Arrearage and purchase date are the two fields most often left blank and the two most often decisive.
• An asset inventory with values and the basis for each value, so exempt and nonexempt property can be separated before, not after, a chapter is chosen.
• Prior bankruptcy history — chapter, district, case number, filing date, and outcome, for every prior case including dismissals.
• Transfers, gifts, and repayments to family or friends within the statement of financial affairs lookback periods.
• Tax debt by year and status, plus whether returns are filed, which affects both dischargeability and Chapter 13 confirmation.
• Domestic support obligations, pending lawsuits, garnishments, business interests, and anticipated money — inheritances, settlements, bonuses, and refunds.

The cost of choosing on incomplete data

The wrong chapter is rarely discovered quietly. In a Chapter 7 filed on income figures that turn out to be understated, the United States Trustee or a creditor moves under §707(b) and the client faces dismissal or conversion after the fee is spent and the filing is public. In a Chapter 13 built on a budget that never balanced, the plan fails to confirm or the case is dismissed under §1307(c) for nonpayment — often a year in, after the client has made payments that produced no discharge and no cure. Conversion rights exist under §706(a) and §1307(a), but conversion is not free: new deadlines, new documents, a new trustee, a client whose confidence in the firm has taken a hit, and sometimes an exemption or valuation posture that is materially worse than it would have been on day one.

None of that is prevented by better legal judgment. It is prevented by a complete, dated, verified intake record put in front of the attorney before the chapter is chosen — which is why intake quality, not petition-drafting speed, is what determines how many of a firm’s cases run cleanly from filing to discharge.

This guide is general information for law-firm staff, not legal advice for any particular case.