Chapter 7 bankruptcy requires complete liquidation
of all debts and cancellation of all no-exempt debts
whereas in chapter 13 bankruptcy a court-mandated
payment plan is made in which affordable payments have to be paid to the creditors
each month. The most common bankruptcy filing is chapter
7. Companies, married couples and individuals can file Chapter 7. In this bankruptcy filing
a trustee is appointed to plan the sale of debtor's assets. Primary residence
and personal items like clothing are allowed to be kept by the debtor. After the
liquidation the trustee pays some of the creditors a portion of the money borrowed.
The rest of the creditors might not get anything and all of the financial obligations
are discharged in bankruptcy.



Some debts like child support, taxes, alimony don't get discharged under any bankruptcy
filing. If more debt lies in these categories then you will be better off filing
chapter 13 instead of chapter 7 bankruptcy.



The difference between chapter 12 bankruptcyand Chapter 13 is that
the former is for family farmers whereas the latter for individuals. If a reliable
income source is present, and unsecured debt is less then $269,250 and secured
debt is less then $807,750 then you can file for chapter 13. In this filing a
trustee is assigned which unlike chapter 7 filing develops a repayment plan. The
court makes the final decision about accepting, altering or making of a new plan.
After the acceptance of the proposal, the repayment can take 3 to 5 years after bankruptcy is accepted.



Chapter 11 bankruptcy is similar to Chapter 13
except that there is no limit of the amount owed by the debtor. It was meant for
large corporations but now an individual is also allowed to file a chapter 11
bankruptcy.



The reasons why people adopt chapter 13 and chapter 12 bankruptcies instead of
chapter 7 are simple. First under chapter 13 or 12 filings, the assets are not
liquidated like they are in chapter 7. Secondly, the repayment monthly amount
is only a percentage of the actual debt. In some cases this amount is as low as
30 – 50 cents on a dollar.



Filing for Chapter 13 or any type of bankruptcy is a serious issue which has negative affects
on your credit report and credit
score. It stays on your credit report for a period of 10 years which is indeed a long time and may affect your future chances of geting loans and low interests. While making
a decision for bankruptcy, do counsel with a financial planner or a legal representative before filing chapter 13.