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A Chapter 13 may be preferable to Chapter 7

Filing for bankruptcy in Mississippi is typically a difficult decision with plenty of forethought. However, filing bankruptcy can also be a financial silver lining to much of the stress and gloom that may have permeated the filing person's life.

As explained by the Mississippi Bar, two main options Mississippi residents have when deciding to file for bankruptcy are the Chapter 7 and the Chapter 13 bankruptcy filing. The former is when the person agrees to liquidate assets to help pay the debts while the latter involves a payment plan to pay off the debts, usually at a lower amount.

Chapter 13 benefits

One benefit of a Chapter 13 that is not available under Chapter 7 is that if the filing debtor had a cosigner on any of the debt, that cosigner may be able to receive protection under the Chapter 13 filing. In addition, gaining credit back may be easier in some instances because the creditor who sees the Chapter 13 filing on the debtor's credit report will understand that the debtor paid more of the debt back than if there was a Chapter 7 filing.

Chapter 13 eligibility factors

To be eligible for a Chapter 13 bankruptcy discharge, the filing person must have less than a quarter of a million dollars in unsecured debt. Unsecured debt includes that derived from credit card use and medical bills.

There must also be less than three-quarters of a million owed on the secured debt. Secured debt includes such loans as a home mortgage and an auto loan.

The filing debtor must have a reasonably steady income that indicates he or she can likely pay at least part of the debts in a three-to-five-year period. If the debtor has no income, he or she will likely not be able to successfully file for a Chapter 13.

Payment plan

Essentially, the filing person will propose a payment plan that uses his or her disposable income each month to pay creditors. As noted, the duration of the payment plan is typically between three and five years. Disposable income includes that which remains after the debtor satisfies basic living requirements, such as food, housing and other necessary bills.

On the down side, Chapter 13 has a higher failure rate because sometimes the debtor finds he or she is unable to fulfill the payment plan.

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