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The Differences Between Chapter 7 and Chapter 13 Bankruptcy

Choosing the Best Option for You

In the United States, two main types of bankruptcy exist to help those struggling with debt: chapter 7 and chapter 13. Each has its benefits and drawbacks, making it more or less suitable for different people. This blog will examine the differences between chapter 7 and chapter 13 bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a liquidation bankruptcy. This means the debtor's assets are sold off to repay their debts. A trustee is appointed to manage the sale, and creditors can bid on the assets. The sale proceeds are then used to repay the debtor's debts, with any leftover money going to the debtor.

One of the main benefits of chapter 7 bankruptcy is that it is relatively quick and easy to file. In most cases, the entire process can be completed in just a few months. Another benefit is that chapter 7 bankruptcy allows debtors to discharge most or all of their debts.

However, chapter 7 bankruptcy also has some drawbacks. One is that it can be expensive, as debtors may have to pay legal fees and other costs associated with the bankruptcy process. Another disadvantage is that it can damage a debtor's credit rating, making it difficult (or impossible) to obtain credit in the future.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a reorganization bankruptcy. This means that the debtor's debts are restructured so that they can be repaid over time. A trustee is appointed to manage the repayment plan, and creditors are given a chance to vote on it. The repayment plan typically lasts for three or five years, after which the debtor is discharged from all remaining debts.

One of the main benefits of choosing chapter 13 bankruptcy is that it allows debtors to keep their assets. This is important for people who own a home or have other valuable assets. Another benefit is that chapter 13 bankruptcy typically does not damage a debtor's credit rating as much as chapter 7 bankruptcy does.

However, chapter 13 bankruptcy does carry some of the same drawbacks as chapter 7 bankruptcy. Chapter 13 bankruptcy can be expensive. However, one key difference is that Chapter 13 bankruptcy requires debtors to make monthly payments over a period of time, which can be difficult for some people to afford.

Work with a Bankruptcy Attorney

If you need help determining what type of bankruptcy is right for you or wish to start the legal process, turn to the team at Pacific Cascade Legal. Our team is committed to helping people plan their futures to find financial freedom.


Learn more about our bankruptcy services or schedule a consultation by calling (888) 981-9511 or visiting our website.

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