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Options for filing personal bankruptcy

Individuals in Ohio who are faced with overwhelming debts may be seeking different avenues for relief and might consider filing for bankruptcy. Most consumers typically file for either Chapter 7 or Chapter 13 bankruptcy, and both processes include different benefits and requirements for eligibility. For example, Chapter 7, which might be referred to as liquidation, provides a discharge of certain debts, and Chapter 13, which is also known as the wage earner's plan, reorganizes the consumer's finances, providing that person with a chance to pay back the debts.

Chapter 7 involves the discharge of unsecured debts, which includes medical bills, overdue utilities, personal loans and credit card debt but excludes back taxes, court-ordered support payments and student loans. Chapter 13 requires full disclosure of the filer's finances, including details, such as creditors' names and addresses, regarding outstanding accounts. That information is used to create a plan for repayment that can last three to five years.

A person who is considering Chapter 7 must pass income and means tests to meet eligibility requirements, and that consumer might also be required to participate in credit counseling. Individuals who are not eligible for Chapter 7 may be required to file for Chapter 13 if they wish to seek federal protections. Some also suggest that individuals who want to avoid foreclosure should file for Chapter 13 as well.

Those who are planning to file for personal bankruptcy might find it useful to consult with an attorney who is familiar with the process. That attorney could help a client understand how the filing affects his or her finances in the future and might help gather the information and documentation required to file for protection.

Source: Ebony, "The Different Degrees of Bankruptcy, Explained", Lynette Khalfani-Cox, June 19, 2014

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