When you decide to file bankruptcy in Virginia, one of the first choices you have to make is whether to file Chapter 7 or 13. These offer some similar benefits, but they are quite different in how they reach the resolution. It is essential to understand the options, so you can make a proper decision on which type of bankruptcy to file.
Experian explains that the main difference is that Chapter 7 wipes out your debts through selling your assets while Chapter 13 is a repayment plan. Essentially, you sell any non-exempt assets to get money to pay creditors, making Chapter 7 a liquidation. In Chapter 13, there is more of a reorganization where your debts are adjusted and consolidated into one payment. The bottom line is that with liquidation, you generally will lose your assets because the court sells them to pay back your debts. With reorganization, you usually get to keep your assets.
Beyond this, there are other differences worth noting. To begin with, you must qualify by passing a means test for Chapter 7. This means you have to have a low enough income. Otherwise, you only have the option of filing Chapter 13. The reorganization process takes much longer than the liquidation process, so you can expect Chapter 7 to end more quickly.
The overall process of having to file documents and present information about your finances and assets remains the same regardless of which type of bankruptcy you file. It is in the actual process where differences become apparent. This information is for education and is not legal advice.