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

Chapter 7 and Chapter 13 Bankruptcy are two types of bankruptcy, and both can help individuals manage overwhelming debt. In Chapter 7 Bankruptcy, the individual is allowed to sell off certain assets in order to pay off the debts. The individual’s remaining debt is discharged or wiped out. In Chapter 13 Bankruptcy, the individual keeps all of their assets, but still has to pay back their debt over a 3-5 year period. Chapter 7 Bankruptcy is often referred to as “fresh-start” bankruptcy because it wipes out almost all of the individual’s unsecured debt; unsecured debt is debts without a collateral, such as credit card debt. However, some types of debt, such as child support, student loans, and taxes are not wiped out in this type of bankruptcy. Chapter 13 Bankruptcy is typically referred to as “reorganization” bankruptcy because it requires the individual to reorganize their finances and come up with a payment plan. In California, if you are earning more than the median income for your household size in California, you must file a Chapter 13 Bankruptcy. The primary difference between these two types of bankruptcy is that Chapter 7 Bankruptcy wipes out almost all of the individual’s unsecured debt while Chapter 13 Bankruptcy requires the individual to pay back their debts over a 3-5 year period. Both types of bankruptcy can be used to help individuals get out of debt and back on their feet, but it is important to consider the specifics and have the advice of a bankruptcy attorney before making a decision.

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

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