How Bankruptcy Works

Chapter 7 and 13 Bankruptcy Timelines

Personal Bankruptcy Chapters Summary
and Timeline to Discharge


A Chapter 7 bankruptcy is called a liquidation plan and takes approximately 90 days from filing to discharge (assuming there are no problems). This is the most desirable bankruptcy since it is done in 3 months, however some people do not qualify for a Chapter 7 bankruptcy due to high income or owning assets that are worth more than we can protect as exempt. We will check your eligibility to file Chapter 7 and the consequences or options to file Chapter 13.


A Chapter 13 Bankruptcy is a re-organization payment plan allowing a debtor to keep non-exempt assets that would normally be sold (liquidated) in a Chapter 7 to pay part of their debts. These non-exempt assets exceeding the value of what we can protect from creditors, such as a family cabin, boat, RV, or other non-exempt assets. Also, if a debtor makes too much income they may not qualify for a Chapter 7. A Chapter 13 Bankruptcy petition is setup on a 3 to 5 year repayment plan from filing to discharge and the payment is based on what you can afford so you still may only pay pennies on the dollar and the remaining debts are discharged at the end of the plan.

How the Bankruptcy Process works from start to finish

When you file for Bankruptcy, you are preparing a list of all of your assets and all of your debts along with your income and expenses to prepare a budget. You then turn over all of your assets and debts to the Bankruptcy trustee when you file. The Trustee then has control of your Bankruptcy estate. The Trustee's job is to review all of your assets to see what they can use to pay part of your debts. Our job as your Bankruptcy Lawyer is to use the Bankruptcy Code to protect as many assets as we can, otherwise known as exemptions. Exemptions allow you to keep up to a certain value of assets in each category such as household furniture and appliances, one vehicle, retirement accounts, jewelry, etc. For example under Federal exemptions you may keep all of your retirement accounts, but you are only allowed up to $4,100 equity in one vehicle. Usually we are able to protect all of your assets as long as we know about them.

Your Income and Expense also determines whether you are eligible to file Chapter 7 or you must file a Chapter 13 Bankruptcy petition. There are 2 tests to determine this; First is a 6 month lookback at all of your income. If you make less than a specific threshold amount (based on where you live and the number of people in your household) you automatically qualify for a Chapter 7 under that test. If you make more than the amount, you must prove that your required expenses are necessary and exceed your income under IRS expense guidelines to be allowed to file a Chapter 7. A second test is based on your monthly budget looking forward from when you file based on your current dischargeable debts being eliminated. If you have a lot of income left over after allowing for your monthly budgeted expenses (including food, rent, gas, cable, phone, etc. and even a reasonable entertainment expense) then you may be required to file a Chapter 13 based on how much you can afford after paying all of your monthly budgeted expenses each month. We can help you prepare this budget based on your monthly expenses.

These exemption amounts for your assets adjust from time to time along with IRS limits for your qualifying income and monthly expenses. The amounts are based on where you live, how many people in your household. Call us to discuss your situation to see what you qualify for and what options are available to you. When you find yourself in a position where you fall behind on payments, become overdue, creditors are calling and late fees and interest are only making things harder. Before creditors are filing lawsuits, getting judgments against you, and garnishing your wages and bank accounts, you need to consider filing Bankruptcy to eliminate your debts and get a fresh start.