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For many, Chapter 7 bankruptcy has advantages over Chapter 13

When a Massachusetts resident consults an attorney about filing personal bankruptcy, one of the first decisions that must be made is whether to file under Chapter 7 or Chapter 13 of the Bankruptcy Code. For many debtors the decision will be made for them by the Chapter 7 means test; if their monthly income is above the state median and they have the means to enter into a repayment plan under Chapter 13, they will not be eligible for Chapter 7.

For those debtors who do have the option of Chapter 7, it has a number of advantages over Chapter 13. Under Chapter 7 many forms of personal debt are completely discharged, including medical bills and credit card debt. Once debtors file for Chapter 7 bankruptcy, they generally do not have to devote any more of their future income to the repayment of discharged debts. Under Chapter 13, on the other hand, the debtor must enter into a repayment plan and make regular payments to creditors over a period of three or five years.

Chapter 7 also does not place a limit on the amount of debt the person filing can have. A debtor will not qualify for Chapter 13, however, if they have unsecured debts in excess of $336,900 or secured debts in excess of $1,010,650.

Finally, filing for Chapter 7 typically results in debts being discharged fairly quickly. The court will issue a discharge order about 60 to 90 days after the filing date. Once the trustee completes the liquidation of the debtor's nonexempt assets, the bankruptcy case is closed.

Determining eligibility for Chapter 7 and choosing between Chapters 7 and 13 requires a careful review of each debtor's circumstances and a thorough knowledge of bankruptcy law. A local attorney who practices in the area of debt relief can help a client make the decision that is best for them.

Source: Findlaw.com, "Reasons to File for Chapter 7 Bankruptcy Instead of Chapter 13," accessed Oct. 2, 2016

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