How does Chapter 13 differ from Chapter 7 bankruptcy?
In a Chapter 7 bankruptcy, the debtor does not pay off his/her debts. Instead, he/she must turn over all of his/her non-exempt property to the Chapter 7 Trustee. The Trustee will sell all non-exempt assets. Creditors are paid from the proceeds of this sale. In a Chapter 13 you may keep all of your property. Additionally, creditor’s claims may be completely satisfied. The fundamental difference between a 7 and a 13 is that a 7 discharges debts. In a 13, you have the opportunity to 1) pay what you owe, or 2) pay debts that are not discharged in a Chapter 7. Whatever debts are not paid in a Chapter 13 are usually discharged just as they would have been in a Chapter 7.
