What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a form of bankruptcy that allows individuals and businesses to repay their debts through the sale of some of their assets. The bankruptcy court levies a trustee who is responsible for selling the debtor’s non-exempt assets and distributing the proceeds to the creditors. Once the debt is paid off, the case is closed and the debtor is relieved from any further debt repayment. Chapter 13 bankruptcy, also known as reorganization bankruptcy, is a form of bankruptcy available to individuals and sole proprietorships. It allows debtors to keep their assets and create a repayment plan to repay creditors over a 3-5 year period. In Chapter 13 bankruptcy, the debtor proposes a repayment plan that includes a realistic budget and repayment of debts over a 3-5 year period. This repayment plan must be worked out with the help of the debtor’s bankruptcy attorney and must be approved by the bankruptcy court. After the repayment plan is approved, the debtor must make regular payments to the trustee who will be responsible for distributing the payments to the creditors. Once the payment plan is completed, the case is closed and the debtor is relieved from any further debt repayment. The main difference between Chapter 7 and Chapter 13 bankruptcy is that Chapter 7 liquidates assets to pay creditors while Chapter 13 reorganizes debt to pay creditors over a longer period of time. While Chapter 7 is usually a faster process, it does not allow debtors to keep their assets. On the other hand, Chapter 13 reorganizes debt and allows debtors to keep their assets. In California, individuals must pass a “means test” in order to qualify for Chapter 7 bankruptcy, while Chapter 13 is available to all individuals who can demonstrate they have the ability to make regular payments.

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What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

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