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Chapter 7 vs. Chapter 13

Individuals in Virginia who file for bankruptcy generally choose between Chapter 7 and Chapter 13. Chapter 7 involves liquidation of nonexempt assets while Chapter 13 involves making payments to creditors over a period of 3-5 years. In many cases, Chapter 13 payment plans will last five years. Those who file for either type of bankruptcy must partake in a credit counseling class up to 180 days prior to filing.

There are limitations as to who can file for each type of bankruptcy. When filing for Chapter 7, an individual must pass a means test. If someone cannot pass the means test, then he or she will have to settle for a repayment plan. Those who are filing for Chapter 13 bankruptcy must have $307,675 in unsecured debt and less than $922,975 in secured debt.

When the debts are discharged, the debtor no longer has a liability to creditors, regardless of which section of the bankruptcy code was used. Those who opt for liquidation may be able to keep their home under the homestead exemption or if the home is a marital home. Under a repayment plan, the homeowner keeps his or her home as long as the payment plan is adhered to. In either scenario, a debtor must pay current mortgage payments.

If an individual is dealing with foreclosure or other creditor actions, it may be worthwhile to file for bankruptcy. With the help of a bankruptcy attorney, a debtor may be able to keep his or her home or other possessions while negotiating a new payment plan with creditors. In some cases, it may be possible to liquidate assets and have debts discharged quickly. Once the debts are discharged, creditors may no longer take action to collect on them.

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