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Types of bankruptcy: Liquidation vs. Reorganization

There are two basic types of bankruptcy: liquidation and reorganization.

Chapter 7 falls into the liquidation category. It is referred to as a liquidation bankruptcy because any of your property that isn’t exempt can be sold (“liquidated”) and the proceeds used to pay back your creditors.

Chapter 13 is a reorganization bankruptcy. Under a Chapter 13 bankruptcy, you get to keep all of your property. Rather than wiping out your debts completely, a Chapter 13 bankruptcy “reorganizes” your debts, and a monthly payment plan is created by which you repay all or some of your debt over the course of 3 to 5 years.

Whether liquidation or reorganization bankruptcy is right for you depends on your financial situation and other individual circumstances. An experienced Texas bankruptcy attorney can advise you on the most beneficial course of action.

For free legal advice on Chapter 7 and Chapter 13 bankruptcy, contact the Texas bankruptcy law firm of Fears | Nachawati today. To speak with a Texas bankruptcy lawyer at no charge, simply email us or phone us toll free at 1.866.705.7584.


Types of bankruptcy: Liquidation vs. Reorganization