What is the difference between Chapter 7 and Chapter 13 bankruptcy?

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Dmitriy Fomichenko, President, Sense Financial

@dfomichenko • 11/06/15 This answer was first published on 11/06/15. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection, sell it, and distribute the proceeds to your creditors.

In Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time. The amount you'll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own. You lose no property in Chapter 13 bankruptcy, because you fund your repayment plan through your income.

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