What is the difference between Chapter 7 and Chapter 13?

The primary difference between a Chapter 7 and Chapter 13 bankruptcy involves how a debtor’s debts are paid off during the bankruptcy process.

In Chapter 7, the debtor’s estate is largely liquidated. The money from the liquidation is used to pay off as much of the debt as is owed to creditors.

In a Chapter 13 bankruptcy, the debtor usually does not liquidate large portions of the estate. Instead, the debtor comes up with a plan to pay off all or a substantial portion of debts within a three to five-year period. Ultimately, filers for Chapter 13 bankruptcy get to keep more of their property. Creditors recover more money on the debts they’re owed.