Chapter 7 Versus Chapter 13 Bankruptcy
Despite the fact that there are actually five different types of bankruptcy filings available, the most common is Chapter 7 and 13. These are designated for individuals, rather than corporations. However, the proceedings are still very different.
Chapter 7
In this model, also known as liquidation, debts may often be discharged. The courts look at the assets the individual has and liquidate those eligible in order to pay for the debt. The person does not necessarily lose everything though contrary to popular belief. Certain items may be retained and will vary on an individual basis.
Chapter 13
This is more or less a repayment plan that may span from 3 to 5 years. Although debts are repaid, the amount may be reduced in certain cases with exception to secured debts and property taxes for example. The individual gets to retain their property and some bills may still be discharged by the courts.