Chapter 7 Meeting of Creditors vs. Chapter 13 Meeting of Creditors

The focus of the bankruptcy trustee in the meeting of creditors often differs depending on whether yours is a Chapter 7 or Chapter 13 case.

by: , Attorney

In general, the procedures involved with the meeting of creditors (also called a 341 hearing) are the same for both Chapter 7 and Chapter 13 bankruptcy. But while the hearing process is similar, there are many differences between what Chapter 7 and Chapter 13 trustees like to focus on at the meeting of creditors. Read on the learn more about the differences between Chapter 7 and Chapter 13 bankruptcy meetings of creditors.

For more information on what happens at the 341 hearing, see our article on The Meeting of Creditors.

Is There a Difference?

In both Chapter 7 and Chapter 13 bankruptcy, the goal of the bankruptcy trustee is to maximize the distribution to your unsecured creditors. But a Chapter 7 trustee’s objective is to pay back your creditors by selling your nonexempt assets. In contrast, a Chapter 13 trustee’s job is to make sure you are paying all of your disposable income into your repayment plan. This mean that a Chapter 7 trustee will typically concentrate on your property while a Chapter 13 trustee will focus more on your income and expenses.

Chapter 7 Bankruptcy Meeting of Creditors

A Chapter 7 bankruptcy is commonly referred to as a liquidation bankruptcy because the appointed trustee has the power to sell your nonexempt property to pay your creditors. This means that the primary goal of a Chapter 7 trustee is to find what assets you own and determine their value.

While the trustee will question you on other information contained in your petition (such as your income and expenses) to make sure that your paperwork is accurate and you qualify for Chapter 7 bankruptcy, the majority of the questions will typically focus on the value of your property.

Prior to your Chapter 7 meeting of creditors, make sure to review your assets and how you determined the value of each item. If the trustee thinks that an asset is not fully exempt, he or she will examine you thoroughly on the condition of the property and how you arrived at its value. If you can’t provide satisfactory answers, the trustee may ask a broker or appraiser to assess the property’s value.

For more information, see How to Value Personal Property on Your Bankruptcy Petition.

Chapter 13 Bankruptcy Meeting of Creditors

In Chapter 13 bankruptcy, you are allowed to keep your nonexempt assets in exchange for paying off a portion of your debts through a repayment plan. In general, how much you must pay depends on:

  • the types of debt you have
  • the amount of nonexempt property you own, and
  • your disposable income.

Bankruptcy laws require that you pay as much to your unsecured creditors in Chapter 13 bankruptcy as they would have been entitled to in a Chapter 7. This means that just like in Chapter 7 bankruptcy, you can expect questions regarding the value of your assets. But the amount you must pay unsecured creditors also depends largely on how much disposable income you have.

As a result, a Chapter 13 trustee is more likely to focus on your income and expenses to make sure that you are paying all of your disposable income into your repayment plan. If your income is understated or your expenses excessive, the trustee will argue that you have extra disposable income that should be paid to your creditors.

To learn more, see our topic area on The Chapter 13 Repayment Plan.

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