The Differences between Chapter 7 & Chapter 13 Bankruptcies

When analyzing credit reports there are two types of bankruptcies; chapter 7 and Chapter 13.  A lot of the times we get asked what the difference is between them.

Chapter 7:  Bankruptcy discharges most debts in exchange for property that are not covered in the exemptions listed below.

  1. Discharge Most of the Debts you owe.
  2. Bankruptcy trustee can take any property you own that is not exempt from collection.
  3. Exempt list:
    1. Equity in your home. This is called the homestead exemption.
    2. Insurance: You get to keep the cash value of your policies
    3. Public Benefits: Welfare, SSN, and Unemployment
    4. Any equipment needed for your job.
    5. Personal Property: Most of your household items and jewelry to a certain amount.  A lot of what you can keep depends on what your individual state laws stipulate.
    6. Retirement plans.

Chapter 13: Refund payment plan through income.

  1. No one can take your property or household goods.
  2. Plan paid through income.
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