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Unraveling some of the facts of filing for bankruptcy

Bankruptcy is an established traditional remedy in which the government in effect declares that it's better for an individual or married couple to get a fresh start rather than to suffer incessantly in the destructive hold of overwhelming debt. Consistent with that policy, a filing for bankruptcy in a federal court in Ohio allows generally for the elimination of all unsecured debt, and for the reorganization of secured debt that has gone into arrears. A debtor with only unsecured debts such as credit cards and medical bills will usually want to file a Chapter 7. One requirement is that debtors must pass a 'means test' initially to prove that they cannot afford to pay their debts.

If a debtor has secured debt that is in arrears, such as a mortgage loan on a home, and the debtor wants to keep the home, a Chapter 13 would be the only filing available. In a Chapter13, which is called reorganization, the individual or married couple debtors would file a Chapter 13 plan. The plan provides for monthly payments to creditors over a three to five-year period. The appointed Chapter 13 Trustee will administer the plan by collecting your monthly payments and distributing them to your creditors.

The purpose of a Chapter 13 payment plan instead of a quicker Chapter 7 is very often that the debtor wants to retain the home by making payments on the past due amount over a number of months until the arrears are paid. This brings the mortgage or other secured debt current. After the bankruptcy, the debtor simply continues paying the regular monthly payments as if there was no bankruptcy in the first place.

Filing for bankruptcy in Ohio and other bankruptcy jurisdictions intends to achieve more than just eliminating a big load of debt. It also seeks to make consumers more aware of how to budget and handle resources in a more self-protective manner. To satisfy that element you must attend a few credit counseling courses either online, by telephone or in person. Your selected bankruptcy professional can give you all of the necessary information you need to get started and get through this rewarding process.

Source:, "Know these bankruptcy facts before you file," Andrew Housser, April 15, 2013

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