What is the difference between Chapter 7 and 13 Bankruptcy?

Chapter 7 and Chapter 13 bankruptcy are two types of bankruptcy that have significant differences. Chapter 7 bankruptcy is a form of liquidation bankruptcy which allows debtors to discharge their unsecured debts such as credit card and medical debts. It also allows debtors to keep certain assets such as home equity, cars and retirement accounts. Chapter 7 bankruptcy requires a Means Test to determine if the debtor qualifies and has repayment ability. Chapter 13 bankruptcy is a form of reorganization bankruptcy which allows debtors to keep their assets and pay off their debt over the course of a 3-5 year period. This process requires a court approved repayment plan that is approved by the trustee and creditors. As for eligibility, debtors must have a regular income and cannot have more than $394,725 in unsecured debt or $1,184,200 in secured debt. In both types of bankruptcies, debtors can ask the court to discharge debt that is required by the court and creditors. In Chapter 7 bankruptcy, debtors can usually expect to have all unsecured debts discharged within 4-6 months. In Chapter 13 bankruptcy, the repayment plan can last up to 5 years and all debts should be paid off by the end of the repayment period. To summarize, Chapter 7 is a form of liquidation bankruptcy that allows debtors to discharge their unsecured debts and keep their assets. Chapter 13 is a form of reorganization bankruptcy that allows debtors to keep their assets and pay off their debt over the course of a 3-5 year period.

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What is the difference between Chapter 7 and 13 Bankruptcy?

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