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What are the major differences between Chapter 7 and Chapter 13?

On Behalf of | Feb 17, 2022 | Bankruptcy

When you decide to file bankruptcy, you must choose which chapter to file. Typically, consumers will decide between Chapters 7 and 13.

U.S. News and World Report explain there are some important differences between these two bankruptcy options that can help you to make your choice.


The biggest difference is that Chapter 7 is a liquidation process, which means the court will sell off all your non-exempt assets to repay your creditors. The court then discharges or erases any debt leftover. With Chapter 13, you create a payment plan to pay back as much debt as possible. At the end of your plan, the court dismisses any debt remaining.


A Chapter 7 bankruptcy goes much more quickly from start to finish than a Chapter 13. The Chapter 13 plan requires you to repay debts for three to five years, and you do not get a discharge until you complete your plan. With Chapter 7, the discharge comes as soon as liquidation and repayment occur.


A perk of Chapter 13 is you may get to keep more of your assets and even protect the loss of important assets, such as your house. When you file Chapter 7, you will lose any assets you cannot exempt and all assets you are buying on a loan, such as your home or vehicle.

Both options can be a good choice, but you need to match your needs and situation to the chapter that best works for you. Be sure to take time to make a decision because the court can dismiss your case if you do not qualify for the chapter you choose.