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

Chapter 7 and Chapter 13 bankruptcy are two types of bankruptcy available under federal law. Chapter 7 bankruptcy is the more traditional form of bankruptcy and is designed for individuals who are facing significant financial hardship and cannot meet their monthly obligations. This type of bankruptcy involves the liquidation of non-exempt assets in order to pay creditors. Chapter 13 bankruptcy is another form of bankruptcy which gives individuals the opportunity to catch up on past due payments and reorganize their financial debt. With this type of bankruptcy, the debtor proposes a payment plan to creditors, which can include lower interest rates and reduced principal amounts, or even a complete waiver of certain debts. If the plan is approved, the debtor must make regular payments to the court-appointed trustee for a period of three or five years. After the payment plan is completed, the debtor may have some of their debts discharged, meaning they no longer owe any money. In short, both Chapters 7 and 13 bankruptcies provide relief for individuals who are facing financial hardship. However, Chapter 7 deals with liquidation of non-exempt assets, while Chapter 13 allows debtors to structure a payment plan to pay off creditors over a certain period of time.

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

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