Whats the difference between Chapter 7 and Chapter 13 bankruptcy?
A Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy. In Chapter 7 proceedings, you do not pay anything to unsecured creditors included in your bankruptcy petition unless the court requires a liquidation sale of your nonexempt assets. (Nonexempt assets are those not protected from forced liquidation by either federal or state statutes. For example, under the federal statutes, each individual is allowed to exempt, among other things, $17,425 for real estate used as a primary residence, $2,775 for a vehicle, the right to state or federal benefits, and alimony and child support benefits.) If you own assets that are nonexempt, you may be required to liquidate them. The court would then distribute the proceeds from the sale to your unsecured creditors as partial satisfaction of the debts you owe. Any remaining unpaid debt would then be discharged, and you would no longer be held responsible for it. Often known as a “wage-earner’s plan,” a Chapter 13 bankruptcy does not re
