 TITLE: Understanding Priority and Non-Priority Debt in Bankruptcy CONTENT: Chapter 7 vs. Chapter 13 Bankruptcy\n-----------------------------------\nU.S. law allows for two different types of individual bankruptcy procedures: Chapter 7 (also known as liquidation bankruptcy) and Chapter 13 (reorganization bankruptcy). If you file Chapter 7 bankruptcy, most of your assets will be sold off or otherwise liquidated and the proceeds used to pay your creditors. Chapter 7 filers' assets typically amount to less than their total debt.\nIf you file Chapter 13 bankruptcy, the court devises a debt reorganization plan, typically lasting five years, during which you must make repayments that are divided among your creditors. A Chapter 13 repayment plan protects you from making payments you cannot afford, which typically means creditors receive less than the full amount you owe them.\nIn either a Chapter 7 or a Chapter 13 case, because there is typically less money available to repay all creditors in full, it falls to the bankruptcy court to sort out which of your creditors get paid and how much, based on the amount of funds available. That's where the priority and non-priority distinction comes in. END