What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?
Chapter 7 is a liquidation. The individual or business entity’s non-exempt assets become part of the bankruptcy estate and are sold to pay creditors. Individuals receive a discharge and business entities are shutdown. Individual debtors will need to pass the Means Test in order to qualify for Chapter 7 based on their household income. A Chapter 13 is only available to individuals. A Chapter 13 is a restructuring where the debtor will make some form of payment to discharge their debt. The payment is determined based on income and the value of non-exempt assets. The payment period is usually from three to five years.
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