There are many key differences between Chapter 7 and Chapter 13 bankruptcy that can help you determine which one may be the better option for your needs. These are some of the key differences between the two:
- Length of time: Chapter 7 bankruptcy can be completed and debts discharged in anywhere between three and five months. Chapter 13 bankruptcy is not completed until all payments are made, which can take anywhere from three to five years depending on the terms.
- Property: In Chapter 7 bankruptcy, all eligible assets are sold to pay for the debts, which includes any property owned by the debtor. However, with Chapter 13 bankruptcy, debtors are able to keep more of their property and make payments instead, thereby allowing them to keep the assets they have worked too hard to pay for in the past.
- Who can file: With Chapter 7 bankruptcy, both individuals and business entities are able to file. With Chapter 13 bankruptcy, only individuals, including sole proprietors, are able to file.
- Eligibility requirements: Chapter 13 bankruptcy has set limits on the amount of debt you can have in order to be eligible. Chapter 7 bankruptcy has set income limits and uses a "means" test to determine eligibility.