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What is the difference between Chapter 7 and 13?

On Behalf of | Apr 16, 2020 | bankruptcy

Considering filing for bankruptcy is a big first step in regaining control of your financial health and future. Bankruptcy is not the enemy: in fact, declaring bankruptcy may be one of the best decisions you ever make. 

However, it is important to understand that not only are all bankruptcies unique on their own merit, but there are also different varieties of bankruptcy that you can file. If you are filing as an individual, the most common options are either Chapter 7 or Chapter 13. According to, Chapter 7 bankruptcy typically requires you to liquidate non-exempt assets to pay back creditors, while Chapter 13 is more focused on a payment plan. 
What is Chapter 7? 
This type of bankruptcy is by far the most common. This bankruptcy is often called a “liquidation” bankruptcy or a “straight” bankruptcy. The benefits of Chapter 7 include quickly getting rid of debt and stopping collection actions. 
A Chapter 7 bankruptcy consists of surrendering assets in order to pay off creditors. Generally, you will have to also prove that you do not have the personal income to qualify for a Chapter 13 bankruptcy before you can file a Chapter 7 bankruptcy. You will not lose your primary home for filing Chapter 7; however, if you have other assets like a second home, these are usually liquidated. 
What is Chapter 13?
Chapter 13 Bankruptcy is commonly called a “reorganization” bankruptcy. Filing Chapter 13 will require you to sit down with a bankruptcy lawyer and your creditors and come up with a payment plan. Chapter 13 bankruptcies take longer than Chapter 7 bankruptcies do, but they do allow the filer to hold on to all of his or her assets. 


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