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What is the Difference between Chapter 7 and Chapter 13?

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Category: Faqs

A Chapter 7 Bankruptcy is a straight liquidation in which all or most unsecured debts are discharged.  Chapter 13 reorganization is a repayment plan that focuses on stopping creditor actions on secured debts, such as home foreclosures, and allowing you to consolidate other bills to create an affordable monthly budget. A Chapter 7 applies when your monthly income only meets your basic living expenses (i.e. mortgage payments, food, clothing, utilities, etc.). A Chapter 13 applies when you have some disposable income to pay your creditors, even if you cannot pay the debt in full. A Chapter 13 will stop a foreclosure sale or vehicle repossession. The plan will allow you to resume your regular monthly payments while paying the missed payments over time.


Chapter 7 liquidates debts.  Chapter 13 reorganizes debts and can include full or partial repayment of debt, depending upon the debtor(s)’ ability to repay over a period of three to five years.