Chapter 7 & Chapter 13 Differences

Chapter 7 and Chapter 13 Bankruptcies differ in many substantial respects. While both bankruptcies are designed as a mechanism to allow debtors to pay what they can to their creditors and to provide debt relief, they differ greatly in the way that they approach this task.

Chapter 7 bankruptcies approach this task by completely discharging most of the debts owed by the debtor. The exceptions to this rule are debts, which for public policy reasons, cannot be discharged. Most commonly these debts are: taxes, debts owed to government, student loans and child support.

Chapter 13 bankruptcies provide debt relief by structuring the debts that the debtor has into a 3-5 year re-payment program. This repayment program is not based on the amount of debt that the debtor has rather the Chapter 13 repayment program is based on the debtor’s ability to pay. Some debts will be required to be paid in full such as: taxes, governmental debts and child support arrears have to be paid in full on a Chapter 13 plan. Other types of debt will receive a portion of payment with the discharge at the end.