Key differences between Chapter 7 and Chapter 13 bankruptcy

On Behalf of | Aug 30, 2021 | Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

The events of the last year and a half have hit very differently depending on your job and lifestyle. Many people have struggled with making ends meet either because they have lost their job or their business is failing.

When your debt becomes out of control, sometimes you need an assertive approach to get your finances under control and end the collection calls. There are a few different types of bankruptcy, and they provide different levels of support depending on your situation.

These are some of the important differences between Chapter 7 and Chapter 13 bankruptcy.


Since Chapter 7 bankruptcy includes discharging some (or all) of your debt, there are eligibility requirements. The process assesses both your household income and your expenses. Typically, if your remaining income after certain expenses does not leave enough to make meaningful payments, you may qualify for Chapter 7.

Chapter 13 is typically for people who do not qualify for Chapter 7 or those with certain secured debts (like a vehicle or home) who want to keep those assets.

Dealing with the debt

Some people will assume that bankruptcy will completely discharge all of your debt. This is an overgeneralization of what kind of support you can get from bankruptcy. While bankruptcy can help you resolve a variety of debts, it does not apply to all types of debt, and the resolution will be different depending on the type of bankruptcy.

In general, Chapter 7 will help you liquidate your debt. Typically, Chapter 7 debts eligible for liquidation are unsecured debts like medical bills and credit card debt.

On the other hand, in Chapter 13 bankruptcy, you will go through a restructuring of your debts. Rather than liquidating your debt, you will get a new payment plan that considers your income and other financial obligations.

Depending on your situation, bankruptcy can be a valuable tool to help you get through a stressful financial situation.