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How are Chapter 7 and 13 different?

If you are considering filing for bankruptcy in Georgia, one of the first decisions you will need to make is whether to file Chapter 7 or Chapter 13. It is a good idea to familiarize yourself with both options. It may also help to look at the specific differences. This can help you to better understand which option will be the best choice for you.

According to the American Bar Association, the basic difference is that Chapter 13 is a repayment plan where you pay back some or all of your debts under the guidance of the court whereas Chapter 7 wipes out your debt without the repayment requirement. In addition, Chapter 7 requires meeting a means test to show your income is within the acceptable range to file this type of bankruptcy.

When looking in to how they affect you, Chapter 13 offers you more options to keep your assets since you are repaying debts. For example, you can usually keep your home under Chapter 13, but with Chapter 7, you have to be able to exempt your home in most cases to keep it. You usually get to keep your vehicle under 13, whereas you may lose it under 7 if no exemption can be taken.

With Chapter 7, your debts are removed by the court. Once the bankruptcy is final, your debts are gone. With Chapter 13, though, you have to repay some or all debts and the bankruptcy is not finalized until you have completed the repayment plan.

Choosing which type of bankruptcy works best for you is an important decision. Make sure you understand the differences and requirements for each. This information is for education and is not legal advice.