What is the difference between the two types of bankruptcy, Chapter 7 and Chapter 13?
Chapter 7 bankruptcy is also called “liquidation” bankruptcy or “discharge of debt”. This form of bankruptcy filing is for individuals who have no hope of paying off their debts, and results in the debts being cancelled, although there are some types of debt that cannot be discharged in Illinois. A test is done called the “means test” which determines whether you are eligible for Chapter 7. Chapter 13 is when also called “reorganization” and it is when arrangements are made to consolidate your debts and they are paid off over a period of time, usually 3 – 5 years. Many types of debt can be negotiated to a lower principal or payment so that it is manageable. In this form of bankruptcy, you do not lose your assets.
