Crucial Differences between Chapter 7 and Chapter 13 Bankruptcy

Last updated 1 year ago

As far as the average consumer is concerned, bankruptcy law involves two separate yet equally important chapters: Chapter 7 liquidation that clears unsecured debts and Chapter 13 debt adjustment. There are significant differences between the two primary consumer bankruptcy chapters, and they are important to understand before starting the bankruptcy process.

What is Chapter 7 Bankruptcy?
Chapter 7, also known as bankruptcy liquidation, is a process by which the majority of your unsecured debt is discharged by selling assets. You may not need to sell off all your property—your primary residence is exempted, for instance—and some unsecured debts can’t be discharged, such as child support and alimony payments.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy works a little different. Instead of selling off your assets, under Chapter 13 bankruptcy law, your debts are adjusted so that they can be paid off over a three or five year period, often at pennies on the dollar.
So Which is Best?
Short answer? Neither. Long answer? Both sections of bankruptcy law have their advantages and disadvantages. Chapter 7 is a way to financially start over, but it is not available to everyone. Chapter 13 doesn’t clear your debts, but it is sometimes seen as more favorable when seeking credit in the future. Speak with a bankruptcy attorney to determine the best option for your specific case.

Bankruptcy law is a complex area of the law, and everyone’s situation is different. Speaking with a qualified bankruptcy attorney is the best way to determine the best course of action for you. To speak with an affordable bankruptcy attorney, give us a call at (262) 827-0375. The Burr Law Office specializes in providing affordable bankruptcy representation for the Milwaukee community. If you need an attorney, put our 17 years of bankruptcy law experience to work for you!

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