Chapter 7: Keep some property, liquidate other assets

It was recently revealed that over 190,000 jobs were likely added to the U.S. economy this past March. While that is probably very welcome news for some Mississippi residents, the job market still has a long way to go. Many residents are still struggling with unemployment or underemployment; in either case, that challenge can lead to one's struggling with debt as well.

For those hit hardest by the tough economy, personal bankruptcy may be a consideration. Often one of the most thorough ways to obtain a fresh financial start, bankruptcy nonetheless should always be carefully considered. It's important for Mississippians to understand the basic differences between Chapter 7 bankruptcy and its Chapter 13 counterpart. Both can be used for getting debt under control, but in different ways.

In Chapter 7, secured debts generally stay intact. These include car loans and mortgages on homes. This element of Chapter 7 makes it appealing to those whose main priority is keeping some of their property. Non-exempt assets, though, can be liquidated for distribution to various creditors. This asset liquidation aspect is why Chapter 7 is sometimes known as Chapter 7 liquidation. Interestingly, in some instances of Chapter 7, there are no assets that can be liquidated, so the distribution portion doesn't actually take place.

Another important element of Chapter 7 is one's income level. Sometimes a potential filer's income may be too high for Chapter 7 bankruptcy, so Chapter 13 is chosen instead. As with Chapter 7, there are many advantages to Chapter 13, but the complexity of both merit discussion with an attorney.

Source: WWLP, "Legal minute with Cooley Shrair: Chapter 7 vs Chapter 13 bankruptcy," Michelle Misiaszek, April 2, 2014

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