The primary difference between Chapter 7 and Chapter 13 bankruptcy is the way in which debts are handled. Chapter 7 is often known as liquidation bankruptcy, as filers often must liquidate their non-exempt assets in exchange for erasure of most of their debts. Chapter 13 is often known as reorganization bankruptcy as it allows businesses or individuals to reorganize their debts and repayment schedule. This type of bankruptcy requires debtors to propose a repayment plan that outlines a new schedule for repaying debt.