What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

While both Chapter 7 and Chapter 13 are viable options for people seeking bankruptcy protection, there are differences you should be aware of if you are considering bankruptcy as an option for eliminating your debt.   

Under Chapter 7 bankruptcy, a debtor (the person filing for bankruptcy), is able to eliminate his or her dischargeable debt by liquidating some of their assets to pay back their creditors.  Chapter 7 is by far the most commonly sought after form of bankruptcy, as it is the easiest way to discharge such debt as medical bills, utility bills, credit card balances, and certain types of personal loans. 

Not everyone who applies for Chapter 7 bankruptcy will be approved.  For those who do not qualify for Chapter 7, they may want to consider filing for bankruptcy under Chapter 13.  Chapter 13 bankruptcy works by consolidating all of a debtor's outstanding debt and consolidating into one lump sum.  The debtor is then responsible for paying off the debt over the course of three to five years.  Each month the debtor will pay a certain amount of money towards their debts, and a court-appointed bankruptcy trustee will be responsible for distributing the money to the debtor's creditors.

Which Form of Bankruptcy is Right For Me?

Not all people will qualify for Chapter 7 bankruptcy, so it's best to consult an experienced bankruptcy attorney who can review your financial situation to determine which form of bankruptcy is right for you.  In addition, your attorney can help you fill out the necessary paperwork, and review any and all legal documents to ensure everything is filled out correctly.  With the help of a skilled lawyer guiding you through the bankruptcy process, there is no reason why you cannot successfully file for either Chapter 7 or Chapter 13 bankruptcy.

If you're interested in learning more about the various forms of bankruptcy protection, click here to find a bankruptcy lawyer near you.