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What is the difference between Chapter 7 and Chapter 13 bankruptcy?


In a chapter 13 bankruptcy, the debtor establishes a full or partial repayment plan which is administered by the bankruptcy trustee. A chapter 13 debtor will generally receive a partial discharge of their unsecured debt as a result of establishing a three to five year consolidated repayment plan through the bankruptcy trustee. Under chapter 13, a debtor may be able to retain property that could otherwise have been lost under chapter 7 bankruptcy. In a chapter 13 bankruptcy, the debtor will make a monthly payment to the trustee, and the trustee will distribute those payments to the creditors. 


In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection, sell it and distribute the proceeds to your creditors.


In Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back your debts over time. The amount you'll have to repay depends on how much you earn, the amount and types of debt you owe, and how much property you own. 

Under Chapter 13 bankruptcy, the debtor does not have to meet the means test requirement for income and therefore, it may be a better option for some debtors. However, filing under chapter 13 requires the debtor to have a regular income allowing the debtor to make reliable payments to the trustee under the repayment plan.

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