What is the Difference Between Chapter 7 & Chapter 13 Bankruptcy?
If you are considering filing for bankruptcy, there are some things to consider that your Ohio bankruptcy lawyer will talk with you about in your initial meeting. Some questions that will come up will help determine which type of bankruptcy you will file for- chapter 7 or chapter 13. Your Ohio bankruptcy lawyer at Amourgis & Associates will explain the differences to you and you will be able to start the process to reclaiming your financial health.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is known as “fresh start bankruptcy”. Most chapter 7 bankruptcy cases are known as “no asset cases”. In a typical situation, it takes about three to four months to complete an Ohio chapter 7 bankruptcy. However, there are situations that can cause it to take longer.
Chapter 7 discharges, or wipes out, most of your unsecured debt. Things like utility bills, credit cards, medical bills, payday loans and personal loans are included in this. Most of chapter 7 bankruptcy filings had their debts discharged. Though to qualify for chapter 7 bankruptcy, you must pass a means test. This test examines your finances- things like your income, expenses and both secured and unsecured debts. This will tell your Ohio bankruptcy lawyer where you are at with your finances. It can also help you determine which way to go.
In addition to the means test, there are also some debt requirements that you will have to qualify for. Some people don’t have enough debt for bankruptcy and may have to sell non-exempt assets. Important assets like your home, car and things needed for work can be exempt and can be kept. This makes things worry free, even though may people have the image that they should be vey worried.
Some things to consider if you are considering a chapter 7 bankruptcy. Do you have practically no disposable income? Would it take five years or more to pay off your debt? Is your debt interfering with your relationships? Does your debt cause you to lose sleep at night? Carefully think about these questions and talk to your lawyer about them when you meet.
Chapter 13 Bankruptcy
There are many reasons why a chapter 13 bankruptcy is a better option than chapter 7 in certain cases. The biggest one being that people make too much money to qualify for a chapter 7. Or if you’ve already filed a prior chapter 7 in the past eight years. The means test that you will take at the beginning of your bankruptcy process will help you and your lawyer determine your best options. But a nice way to think of it is that this used to often catch up on your payments or your house, car or student loans.
In your chapter 13 bankruptcy, you will make monthly payments to a trustee. That trustee will then distribute those payments to your creditors. Depending on your situation, the trustee will determine how long that payment plan will take. Usually between three to five years.
You might ask yourself- why would chapter 13 be better for me? Well, this plan allows for you to keep all of your property. Additionally, if you have any loan cosigners, it will protect them from having to repay those loans as you will be assuming those in your repayment plan. If your home is in danger of foreclosure, a chapter 13 bankruptcy will help you free up some finances in order to make your mortgage payments.
Repayment Plan
Your lawyer will work with you to determine a repayment plan for your creditors. This repayment plan will be submitted to the court for approval. Think of your repayment plan like a roadmap to getting out of your debt. It will be going through the next three to five years and allotting all of your disposable income to paying off your creditors. In return, you will be able to keep things like your home and your car. Everyone’s situation is unique and working with an Ohio bankruptcy lawyer is very important during this process.
Once your repayment plan is approved by the court, all you need to do is just make one monthly payment to your bankruptcy trustee. These payments will happen on the approved schedule you submitted in your repayment plan. It is very important to stay current with your repayment plan schedule. If you miss or stop a payment, the court could dismiss your chapter 13 bankruptcy and you could be back to where you started.
Some creditors are entitled to receive 100% of what you owe them. Some are entitled to receive nothing at all. It just depends on the type of debt. Things like child support, alimony, student loans and unpaid taxes are not dischargeable. You’ll get to pay them back over time. However, bankruptcy can help eliminate other debts that can help you make those payments so you can really mostly pay those items you wanted. It also helps reduce or get rid of the bad debts you wanted to have wiped out.
Which Type is Best
Which type of Ohio bankruptcy you qualify for will be determined when you do your initial means test. However, both types of personal bankruptcy can help you regain the control of your finances. It will also help you on your path to rebuilding your credit and your life. Don’t think of your bankruptcy as a bad thing! Think of it as what it is; a second chance. That’s a great thing!
We are qualified to help you navigate the chapter 7 and chapter 13 bankruptcy processes. Give us a call today to learn how to begin. We have the experience and knowledge to help you get started on your bankruptcy.
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At Amourgis & Associates, Attorneys at Law, we only represent consumers. We fight for regular people who have been seriously hurt in accidents. We fight for people who are being crushed by overwhelming debt and need a fresh start. We fight for individuals and families. Never businesses. Never insurance companies. We are loyal to the consumer.
