Chapter 7 -provides discharge of debts and a liquidation of any assets valued above debtor's exemptions. Exemptions are the set value a debtor may have in items such as a house, car, or household goods that a trustee or creditors cannot take. Many Chapter 7 cases are no assets cases having no assets available for a trustee to take, sell, and distribute to creditors. In turn, the debtor receives a discharge of debts. It is advisable for debtors to seek an experienced bankruptcy attorney to discuss which debts are dischargable in a Chapter 7 bankruptcy. Some debts are excepted from discharge such as, student loans.
Chapter 13 - is a reorganization of debts. If the debtor has excess income, received a discharge from a prior chapter 7 within the last 8 years, is attempting to cure mortgage arrears or has equity in something they wish to keep, then the bankruptcy Code provides relief under Chapter 13. The debtor pays the Chapter 13 Trustee a monthly plan payment for no less than 36 and no more than 60 months. It is advisable for debtors to seek an experienced bankruptcy attorney to discuss the advantages of a Chapter 13 bankruptcy and help guide the debtor through the process. At times, Chapter 13 can be the better option.