Difference Between Chapter 7 & 13
Most individuals who enter bankruptcy do so under Chapter 13 (a “reorganization” plan) or Chapter 7 (a “liquidation” of debtor’s assets).
- Chapter 7 liquidation: Chapter 7, commonly referred to as straight bankruptcy, is often what people mean or think of when they use or hear the term generically. In its simplest form, Chapter 7 wipes out most of your debts and, in return, you may have to surrender some of your property. Chapter 7 doesn’t include a repayment plan. Your debts are simply eliminated forever.
- Chapter 13 reorganization: Chapter 13 involves a repayment plan in which you pay all or part of your debts during a three- to five-year period. In a Chapter 13, you propose a debt repayment plan that requires court approval and thereafter keeps creditors at bay as long as you keep making payments