When a Mississippi homeowner or business owner encounters financial problems, it is good to know that there are often multiple options available to help get things back on track. For minor money problems, it might merely be a matter of adjusting one’s spending patterns and focusing on paying off debt. When a more serious financial crisis hits, however, a person may need additional support, such as filing for Chapter 7 or Chapter 13 bankruptcy.
2 separate options within the same program
Bankruptcy refers to a government-regulated debt relief program; however, it is a blanket term with numerous subcategories. Chapter 7 and Chapter 13 bankruptcy are two of the options most frequently applied for when a homeowner is being threatened with foreclosure or a business owner is in need of a restructured payment plan to overcome debt. There are eligibility requirements attached to each type of bankruptcy, and it is possible to qualify for one but not the other.
Basic differences between Chapter 7 and Chapter 13
The following list might help to determine which option is most viable in a particular set of circumstances:
- Chapter 7 typically involves a complete liquidation of assets.
- Chapter 13 enables a person to retain ownership of nonexempt property.
- Chapter 13 protects co-debtors from liability.
- Chapter 7 usually does not take as long to process.
- Chapter 7 is best for those who cannot resolve debt through a repayment plan.
There are income guidelines for bankruptcy applicants. A person must pass a median test to be eligible for each type of bankruptcy. Chapter 13 is often referred to as a “wage earner’s bankruptcy” because an applicant must prove that he or she has reliable income that can be used to pay back lenders over a specified period of time. It is helpful to discuss one’s case with an experienced Mississippi bankruptcy law attorney to determine whether Chapter 7 or Chapter 13 is a better fit for one’s immediate needs and long-term financial goals.