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What is the difference between Chapter 7 and Chapter 13?

Many residents in Mississippi find ways to save up money and work through financial problems; however, some debt situations are much too large to deal with on your own. In these cases, it is often crucial to think about what options are available and what help is accessible.

This often means assessing whether or not filing for bankruptcy is the next step to take. However, before one files, he or she should understand the different types and what one is likely to meet his or her needs.

When it comes to filing for personal bankruptcy, an individual usually files for either Chapter 7 or Chapter 13. But there are many differences between these two processes. In some cases, an individual or family may not qualify for one of them. In other cases, one process provided more benefits for a particular filer versus the other.

What is the difference between Chapter 7 and Chapter 13? The major difference between these two is the income of the filer. Those falling below a certain income level will be eligible to file for Chapter 7 bankruptcy. Additionally, when it comes to Chapter 7, most consider this a simpler quicker process. In fact, roughly 71 percent of all personal bankruptcy cases are Chapter 7.

This does not mean that Chapter 13 does not have benefits. This is typically the type used if the filer seeks to keep their house or a vehicle if he or she is able to stay current with their court ordered payment plan. This is typically not an option for Chapter 7 filers because these assets are sold off to pay off debts.

With regards to nonexempt valuable property, those filing for Chapter 13 will be able to keep this property; however, in a Chapter 7 filing, the owner of the property will have to surrender it unless he or she pays the fair marker value for the property or exchange it for exempt property. Lastly, if an individual is refilling for bankruptcy, he or she cannot file for Chapter 7 unless the prior bankruptcy was Chapter 13. But if he or she seeks to file for Chapter 13, they can re-file regardless what the prior bankruptcy was.

Filing for bankruptcy can be a complex process, and many decisions go into it. Therefore, those considering bankruptcy should fully understand their options and how each type could impact them.

Source:, "Chapter 7 vs. Chapter 13 Bankruptcy," accessed Feb. 24, 2017

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