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What are chapter 7 and chapter 13 bankruptcy for Ohio consumers?

When the founders of our country wrote the Constitution, they were aware that, at times, people can run into financial hardship. The framers of the Constitution gave Congress the authority to enact bankruptcy laws. Life turns can cause bills to mount. Some Ohioans have suffered a catastrophic injury that left them with large medical expenses. Layoffs, divorce, and other reasons for financial distress can vary from person to person.

Filing for bankruptcy is not something an individual does every day. Sometimes, the terminology can be daunting. There are various different types of bankruptcy. Most individuals have no need for many of the different types. There are types for municipalities, family farmers and fishermen and even a provision for international bankruptcies. For the average American there are two specific types that are by far the most common forms of bankruptcy. A chapter 7 bankruptcy or a chapter 13 bankruptcy.

A chapter 7 bankruptcy allows a financially distressed person to gain a fresh start in a relatively short period of time. Each state and federal law provide for certain exemptions, property that is unavailable for creditors in the bankruptcy case. Essentially, non-exempt assets are sold off in a chapter 7 case to pay a portion of unsecured debts. Any balance remaining after the liquidation of non-exempt assets is discharged.

Secured debts, such as car loans and home mortgages, are handled differently than unsecured debts in chapter 7. If the debtor is able to make timely payments and remain current on secured debts, in many cases the individual does not lose the home or car. An experienced bankruptcy attorney can help a person to assess an individual financial situation.

A chapter 13 bankruptcy is typically known as the wage-earner's plan, or repayment plan. A person with a regular income can create a repayment plan that typically runs three to five years. The plan includes a household budget that generally allows the person filing under chapter 13 to maintain the household and put food on the table. At the conclusion of the plan, like in chapter 7, any remaining balances on unsecured debts are discharged.

Not all debts can be discharged in bankruptcy. Certain back taxes, child support payments, alimony and student loan debt are generally non-dischargeable debts. Once a bankruptcy case is filed, the collection calls and letters stop. The road to rebuilding personal finances can begin. The bankruptcy does remain on a credit record for seven to 10 years, but the conclusion of a successful bankruptcy proceeding can allow a debtor to breathe easier without the weight of debts to bogging the individual down.

Source: San Francisco Chronicle, "How To Survive A Bankruptcy Filing," Andrew Beattie 7 Apr 2011

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