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

The difference between Chapter 7 and Chapter 13 Bankruptcy is significant. Under Chapter 7 Bankruptcy, all of your non-exempt assets are liquidated and the proceeds go to creditors. This is the most common type of Bankruptcy, and is generally best for those who have few assets and a lot of unsecured debt. In contrast, Chapter 13 Bankruptcy is a repayment plan. This type of Bankruptcy does not require liquidation of assets, but instead requires payments to creditors be made over a three to five year period. It is best for those who have enough income to commit to monthly payments, yet still need to reduce their debt. In Washington, those filing for Chapter 13 Bankruptcy must attend a debtors education class and submit a payment plan to the Bankruptcy court for approval. Should individuals fail to make payments as required, their petition for bankruptcy may be dismissed. In summary, the primary difference between Chapter 7 and Chapter 13 Bankruptcy is the way in which debt is handled. Chapter 7 requires liquidation of assets, while Chapter 13 requires a payment plan. Both types of Bankruptcy will have a serious impact on one’s credit rating, but Chapter 13 offers a way to rebuild credit over time.

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

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