Bankruptcy basics: Differences between Chapter 7 and Chapter 13

On behalf of The Rollins Law Firm posted in Chapter 13 on Tuesday, November 18, 2014.

When it comes to filing for personal bankruptcy in Mississippi, there are two common types that many hear about: Chapter 7 and Chapter 13. While each is different, both of these aim to give the filer a fresh financial start by either eliminating their debt or making their debt more manageable.

At The Rollins Law Firm, our attorneys provide education and assistance when filing for bankruptcy, including Chapter 7 and Chapter 13. In this post, we will discuss these two types of bankruptcies at a rather high level, to merely give our readers a basic idea of the differences between the two.

The first thing for a potential filer to realize is that the right type of filing – Chapter 7 or Chapter 13 – will largely be dependent on a person's financial situation.

In order to be able to file for Chapter 7 bankruptcy, a filer must pass the mean's test. In Mississippi, there is an income cap. If someone earns more than this, he or she will not be able to file for Chapter 7. Rather, Chapter 13 may be a better option.

Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy. This is because, typically, assets are sold off in order to pay back creditors. With this type of filing though, keep in mind there are property exemptions and someone who files for bankruptcy may still be able to hold on to property, such as a home or car.

With Chapter 13 bankruptcy, also referred to as a "wage earners" bankruptcy, a repayment plan is created. The idea is for a filer to follow this plan for three to five years. At the end of this time period, most – if not all – of a person's debts are discharged. This type of bankruptcy is often recommended for those who fall outside of the mean's test for Chapter 7 and who have regular income.

Again though, this post is only intended to provide a brief explanation on the two main types of personal bankruptcy someone may consider filing for. Visit our Chapter 7 Vs. Chapter 13 bankruptcies page to learn more.

Client Reviews
I had a wonderful experience. The staff were nice and very informative. The process was quick and easy. Very affordable for me being a single parent. Would recommend anyone there. - Lashay H.
The Rollins firm assisted me at a very low point in my life. After having a lot of medical issues and expenses, I found myself unable to make ends meet. Mr. Rollings and his staff worked very promptly to help. They made the process so easy to complete. - Vinester Smith.
Fast response and professional advice. Really great to work with and understand what a difficult time in one’s life this is. Will recommend to anyone - Bryan Aust.
My wife and I were in an impossible financial situation where over time, we had built up so much debt that we could no longer keep up with all the payments. We were getting further and further behind until we reached out to the Rollins Law Firm for help. They have the knowledge and expertise through their experience to handle our particular situation. Their entire team of professionals are always available to answer questions, explain your options, and then provide the legal service that you need to relieve your financial worries and get you back on the right track! I recommend the Rollins Law Firm to anyone who needs help to deal with financial struggles. - Mike Zegelien.