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Chapter 7 vs. Chapter 13
Chapter 7 involves liquidating assets to pay creditors. That means debts that are not exempt are sold to cover obligations. The remaining debt could be subject to discharge, meaning the debtor no longer has to pay the obligations. Not all debt is eligible for discharge, such as alimony and certain taxes.
Would-be Chapter 7 filers must pass a means test that examines debts vs. income, among other factors. Those who cannot pass the means test could wait and file again or file for Chapter 13. Chapter 13 works differently since it involves proposing a payment plan to pay off a reduced amount of debt.
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