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Personal Bankruptcy 101: Chapter 7 vs. Chapter 13
The commencement of a bankruptcy case is to decide which type of bankruptcy to declare. For most consumers, this is a question of filingeither Chapter 7 or Chapter 13 bankruptcy. But what’s the differencebetween Chapter 7 and Chapter 13 bankruptcy?
 
In basic terms, a Chapter 7 bankruptcy is the basic type of bankruptcy that was designed to eliminate unsecured debts. It is also referred to as a “straightliquidation bankruptcy”.
 
On the other hand, Chapter 13 bankruptcy involves reorganizing debt andplacing the debtor on a three to five year interest-free repayment plan.
 
Both types of bankruptcy must be filed in federal bankruptcy court.
 
CHAPTER 7 BANKRUPTCY
 
Chapter 7 bankruptcy was designed to eliminate unsecured debts, such as:
 
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credit card debt
 
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unsecured loans
 
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medical bills
 
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utility bills
 
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payday loans
 
Chapter 7 is for a person, company or corporation who cannot afford to payback their debts. Most people who file Chapter 7 bankruptcy have little or newincome and few assets.
 
Keep in mind, you must qualify to file this type of bankruptcy by taking theChapter 7 means test.
 
Under Chapter 7 bankruptcy, if you have significant property that is not exemptunder your state bankruptcy laws, the bankruptcy court has the right to sell it topay off your debts. Exempt property may include automobiles, work-relatedtools and basic household furnishings.
 
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