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

In the state of Virginia, there are two main types of bankruptcy that an individual or business may file for: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is known as “liquidation bankruptcy” because it involves the liquidation of the debtor’s assets in order to pay off as much of the debt as possible. In Chapter 7 bankruptcy, the debtor is discharged from their personal liabilities, meaning that they no longer have to make payments on unsecured debt. This type of bankruptcy is often the option of choice for individuals or businesses that have few assets and a large amount of debt. Chapter 13 bankruptcy is also known as “wage earner’s bankruptcy.” It is intended to help individuals who have a steady income but are in need of debt relief. This type of bankruptcy involves a repayment plan that lasts 3-5 years. During this time, the debtor will still be responsible for repaying a portion of their debt according to the terms of the repayment plan, but the unsecured debt that they still owe will be greatly reduced. In summary, the difference between Chapter 7 and Chapter 13 bankruptcy is that Chapter 7 involves the liquidation of the debtor’s assets in order to pay off as much of the debt as possible, while Chapter 13 involves a repayment plan that allows the debtor to pay back a portion of the debt over a period of 3-5 years.

Related FAQs

Does filing for Chapter 7 Bankruptcy stop foreclosure?
Is credit counseling a requirement for filing for Chapter 7 Bankruptcy?
Can I keep my retirement accounts after filing for Chapter 7 Bankruptcy?
Will filing for Chapter 7 Bankruptcy stop foreclosure?
Is there a possibility of my case being dismissed when filing for Chapter 7 Bankruptcy?
Can I keep certain personal items after filing for Chapter 7 Bankruptcy?
How do I know if I’m eligible for Chapter 7 Bankruptcy?
Must I list all of my assets when filing for Chapter 7 Bankruptcy?
Are unsecured debts discharged in Chapter 7 Bankruptcy?
What happens to my creditors when filing for Chapter 7 Bankruptcy?

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