Chapter 7 is the most common type of bankruptcy and is also frequently called a “liquidation” bankruptcy.  To qualify for Chapter 7 bankruptcy, you must meet income requirements.  The purpose of Chapter 7 bankruptcy is to eliminate your responsibility to pay or “discharge” debts such as unsecured credit card bills, medical bills, debts due after repossession of vehicles or home foreclosures.  Chapter 7 provides a “fresh start” to the debtor.

Commonly known as the reorganization or debt repayment, chapter 13 bankruptcy allows you to eliminate debt by creating a repayment plan for three to five years. Under this chapter, you can repay all or part of your debt and avoid home foreclosure or vehicle repossession. At the end of your plan, the remaining unpaid debts are discharged, and the debtor is no longer responsible for payments.