Chapter 7 Bankruptcy: A Liquidation Option

Chapter 7 bankruptcy is a liquidation bankruptcy that allows individuals to discharge most of their debts. This type of bankruptcy involves the sale of non-exempt assets to pay off creditors.

• Exemptions vary by state, but typically include personal property, such as clothing and furniture, and certain financial obligations, like child support and taxes.
• The bankruptcy court will evaluate all assets to determine which ones are exempt from being sold or seized.
• Debtors can choose to continue making regular payments on their debts during the liquidation process.

Chapter 13 Bankruptcy: A Repayment Plan

Chapter 13 bankruptcy is a repayment plan that allows individuals to reorganize their debt and create a plan to pay off creditors over three to five years.

• Debtors must file a petition with the court, outlining their income, expenses, and assets.
• The plan will be approved by the bankruptcy court and may include payments to creditors or the creation of new assets.
• The bankruptcy discharge will be released after 36 months, but debtors can continue making regular payments on their debt plans.