Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a form of both consumer and commercial bankruptcy. Under this type of filing, debtors resolve their financial issues by sorting their assets into exempt and non-exempt items, and liquidating all non-exempt goods. The money earned from these sales is used to pay off all secured debts. Unsecured debts are eliminated through Chapter 7.
Chapter 13 bankruptcy, also known as reorganization bankruptcy, is typically used by consumers and small businesses. Under this filing, debtors resolve their financial issues by restructuring their debt repayment plans. The repayment period is lengthened, and the amount paid each month is lowered. Typically, rates are also significantly lowered, as well.
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