Chapter 7 bankruptcy and Chapter 13 bankruptcy are the two most common forms of personal bankruptcy. They both offer varying degrees of financial freedom, while also providing unique benefits to the filer. So what are the differences between these two forms of bankruptcy and how can you best utilize them?
Let's start with Chapter 7 bankruptcy. This form of bankruptcy centers on the idea of liquidation: that is, some of your assets will be sold to cover for your debts. Some of your debts will also be outright eliminated in the process. And some of your assets may be exempt from the liquidation process. Chapter 7 is excellent for eliminating many different forms of debt -- but you will have to be willing to lose some assets to achieve it.
Chapter 13 bankruptcy, meanwhile, centers on the reorganization of your debts and a repayment plan. This new financial structure will give you time to pay back your creditors. The big benefit here isn't just to the new terms for paying, but it is also the broad protections Chapter 13 gives you in regards to assets. Chapter 13 can protect your home, your car, and many other critical assets from the bankruptcy process.
There are many different rules and guidelines for qualifying for these two forms of bankruptcy, so you should consult with an attorney before making any decisions about filing. Bankruptcy can be very helpful -- but you must make sure you're going about it correctly.
Source: FindLaw, "Chapter 7 vs. Chapter 13 Bankruptcy," Accessed Dec. 21, 2017