Finding that one’s financial outlook is in a state of limbo can open the door to a world of stress. Mississippi residents already facing this daunting obstacle understand the severity of an economic crisis. While the right solution can depend entirely on one’s financial goals and situation, oftentimes bankruptcy can come to the rescue. Many consumers might wonder, what is the difference between Chapter 7 and Chapter 13 bankruptcy?
Money Crashers is quick to point out that anyone can file for Chapter 7 or Chapter 13 bankruptcy; despite this fact, courts must ultimately approve of one’s petition. If a trustee believes the consumer should file for a different type of bankruptcy, they may deny the petition in court. For example, Money Crashers notes that consumers are commonly turned away from Chapter 7 bankruptcy if they fail a means test or have adequate funding to pay off minimal debt. Those without significant income or assets may experience a smoother process filing for Chapter 7 bankruptcy. On the other hand, Chapter 13 bankruptcy can be beneficial if the consumer has important assets or has sufficient income to make regular debt payments.
The American Bar Association also considers the differences between Chapter 7 and 13 bankruptcies. When it comes to these plans’ effects on debt, Chapter 7 bankruptcy results in nearly a complete discharge of pre-petition debts. Under varying plans, Chapter 13 bankruptcy can allow a portion of debts to be paid off over time. Consumers may keep their homes under Chapter 7, but must keep up with mortgage payments; those filing Chapter 13 can preserve homes if payment plans are successful. Depending on the individual plan, this same process may apply to one’s vehicle. There may be a fair share of exceptions and detailed guidelines to the process, but filing bankruptcy can give one the potential to start over financially and move on with life.