What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
While both Chapters are available to use, it is important to understand the significant differences. First, Chapter 7 requires you pass a means test. If you are able to have sufficient disposable income to pay your overdue/past due bils, you will be required to file Chapter 13.
Chapter 13 is known as "Wage Earners Bankruptcy". In effect, the court will restructure your debt and you will be paying it back over a period of three to five years. In Chapter 7, you will not be paying debt back that you have not reaffirmed.
Important notes: Child support, spousal support, taxes and student loans may not be discharged during Chapter 7.
You can read this document put out by the American Bar Association as well.
In Chapter 7 Bankruptcy you can ask the bankruptcy court for release into the debts, In exchange of you have to give some part of your property to the bankruptcy trustee for distributing to your creditors.
In Chapter 13 bankruptcy, you can file for a repayment plan with the bankruptcy court to pay back all debts or you can pay in the 3 year limitation period, its depend on how much you earn, how much debt you owe, how much property you own, etc..
