What is the difference between Chapter 7 and 13 Bankruptcy?

Chapter 7 and Chapter 13 Bankruptcy are two forms of bankruptcy that are available in Washington. Chapter 7 Bankruptcy is sometimes referred to as “liquidation bankruptcy” or “straight bankruptcy”. This type of bankruptcy allows consumers to clear out most of their debts by liquidating non-essential assets and discharging the remaining balance. Chapter 13 Bankruptcy, on the other hand, is sometimes referred to as “wage earner bankruptcy” or “reorganization bankruptcy”. In this type of bankruptcy, consumers can propose a repayment plan to their creditors. The repayment plan is often based on the consumer’s ability to pay and can usually last anywhere from three to five years. To qualify for Chapter 7 Bankruptcy in Washington, an individual must pass a “means test” which looks at the individual’s income and expenses. If the individual’s income is below the median for the state, then they should be able to qualify for Chapter 7 bankruptcy. On the other hand, Chapter 13 Bankruptcy does not require a means test; however, the individual must have a regular source of income in order to qualify. In summary, the main difference between Chapter 7 and Chapter 13 Bankruptcy is the type of repayment plan offered. Chapter 7 allows individuals to liquidate their non-essential assets and discharge any remaining balance while Chapter 13 allows individuals to propose a repayment plan to their creditors. Ultimately, it is important to consult with a licensed Bankruptcy Specialist to discuss the best option for the individual.

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What is the difference between Chapter 7 and 13 Bankruptcy?

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