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  • Brian D. Shapiro

Chapter 7 vs. Chapter 13 - What is the difference?

Updated: Mar 18

Chapter 7, also known as liquidation, allows individuals to give up nonexempt assets and walk away from most debts. To qualify, debtors must pass the means test — that is, their income must be less than their state’s median income. This is a relatively quick process that is normally completed in six months,


Chapter 13, is available to individuals who need to restructure their debt. Typically, an individual files Chapter 13 when they do not qualify to be in a Chapter 7 and/or they are attempting to save their home or a vehicle. In a Chapter 13, some creditors will be paid back in full, others may be paid back a percentage and others may receive nothing. Typically, the repayment period is from three to five years. Importantly, to qualify a debtor must have regular income, and there are debt thresholds that restrict eligibility. Unsecured debt under this filing must be less than $419,275 and secured debts must be no more than $1,257,850.


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