What is the difference between a Chapter 7 and 13?

Chapter 7 bankruptcy is known as a liquidation bankruptcy. To qualify, you must earn below a certain income amount. A Trustee is appointed to your case to administer your “estate”. According to the law, you are allowed to keep a certain amount of real property, personal property, and equity in your property, called “exemptions”. The Trustee will see if there is any property that is “non-exempt”, and if so, will sell those assets to pay your creditors. At the end of the process, which usually lasts 6 months, all your dischargeable debt will be erased.

Chapter 13 is known as “reorganization” or “wage earner’s” bankruptcy. It is generally for people with a steady income, who have money left over at the end of the month to pay to their creditors. Chapter 13 is also appropriate for those who have assets they wish to keep. The payment plan lasts 3 – 5 years, and at the end your debts are discharged.

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