What is the Difference Between Chapter 7 and Chapter 13?

The main differences between Chapter 7 and Chapter 13 bankruptcy are the type of bankruptcy, who can file, the outcome for unsecured debts, property loss, and the repayment plan. Here is a comparison of the two:

• Type of Bankruptcy: Chapter 7 is a liquidation bankruptcy, while Chapter 13 is a reorganization bankruptcy.
• Who Can File: Both individuals and business entities can file for Chapter 7 and Chapter 13 bankruptcy.
• Outcome for Unsecured Debts: Chapter 7 bankruptcy allows people to completely eliminate their unsecured debt after a specific period, while Chapter 13 bankruptcy allows people to reorganize and repay some portion of their debts.
• Property Loss: In Chapter 7 bankruptcy, some or all of your property may be sold to pay off your debts. In contrast, Chapter 13 bankruptcy allows you to keep your property, including secured assets like your home and car, as long as you follow a repayment plan.
• Repayment Plan: Chapter 13 bankruptcy requires a repayment plan, which allows individuals to restructure their debt, catch up on past-due mortgage payments, and reduce and repay debts in smaller amounts over a longer period. Chapter 7 bankruptcy does not require a repayment plan, as the focus is on liquidating assets to pay off debts.

Your unique financial situation and goals will determine which type of bankruptcy is best for you. It is essential to consult with a bankruptcy attorney to discuss your options and make an informed decision.

Comparative Table: Chapter 7 vs Chapter 13

Here is a table highlighting the key differences between Chapter 7 and Chapter 13 bankruptcy:

Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves selling some or all of the debtor's property to pay off debts. This is often the choice for those without a home and limited income. On the other hand, Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows the debtor to keep their property, including secured assets like homes and cars, as long as they follow a repayment plan. This plan typically involves paying off debts over a 3-5 year period. Some debts, such as mortgages, tax debts, child support, and student loans, may not be discharged in either Chapter 7 or Chapter 13 bankruptcy.