Understanding Different Chapters of Bankruptcy

Making the decision to file for bankruptcy is always a difficult one, but when financial problems become overwhelming, doing so may be the best choice available. Bankruptcy is a legal way to have many debts forgiven and put you on the road to financial recovery.

If you’re a good candidate for bankruptcy, filing can keep creditors from harassing you and seizing your possessions, allow debts to be discharged, and provide a way for you to keep assets and begin to rebuild your life.

However, anyone considering filing for bankruptcy can be confused by the different choices available. The United States Bankruptcy Code provides five types of bankruptcy. Each is identified by the chapter of the code that describes it, and each serves a different purpose. Because there is more than one type of bankruptcy, deciding which way to go is not always easy. In addition, a bankruptcy that is not filed properly can leave you stuck with unexpected expenses and debts that are not resolved.

The skilled and compassionate Ohio bankruptcy lawyers at Fesenmyer Cousino Weinzimmer  are dedicated to helping you through the maze of bankruptcy types so you can obtain financial freedom. A free initial consultation and careful evaluation of your individual financial situation by our Ohio debt-relief attorneys will give you the information you need to help you decide.

Call one of our conveniently located office branches at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) or email for your free consultation so we can determine what financial solutions will work best for you.

What are the Types of Bankruptcy?

While the bankruptcy code outlines five types of bankruptcy, the most common types are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy
This is the most common form of bankruptcy. A Chapter 7 bankruptcy, is also known as a “liquidation” bankruptcy, and it allows the debtor to make a fresh start. It enables you to discharge (eliminate) most or all consumer and/or business debts, and it is over in a few months, so you can begin rebuilding credit quickly.

Once Chapter 7 has been filed, a trustee collects assets that are not exempt, sells them, and distributes proceeds to creditors. There are Ohio bankruptcy exemptions that list types of property that cannot be sold; including clothing, cars, equipment used for work (like tools) and household furnishings. If you do not own a great deal of property, your possessions may be all be exempt, qualifying you for a “no asset” case.

If your income is too low to pay credit card bills, medical bills, utilities, payday loans or personal loans, if there are no cosigners involved, or if you are facing court action by creditors, Chapter 7 may be your best option.  It is also good for businesses that wish to liquidate their assets and discontinue business.

Not everyone is eligible for Chapter 7 bankruptcy protection. Your income and debt will be subjected to something called a “means test” to determine whether you qualify.  If you don’t, you may still qualify for Chapter 13 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is best for those who don’t qualify for Chapter 7 and who have a steady income, financial problems that are temporary, and a desire to repay some of their debt in order to keep an asset such as a car or a house.  Under Chapter 13, the court will approve a plan that allows you to repay some or all of your debt affordably over a three to five year period. Payments to creditors are made through a trustee; and during the repayment period you are protected from actions by creditors including; lawsuits, wage garnishments and harassment. If you successfully complete the court-approved payment plan, the remaining debts covered by the plan are discharged.

Chapter 13 Bankruptcy is preferable if you owe debts that are not dischargeable under Chapter 7 (such as taxes and child support), if you have liens that are larger than the value of the assets securing the debt, if you have years of unfiled taxes, if you are behind on car or house payments, or if your assets are worth more than the available exemptions.

Chapter 11 Bankruptcy

Chapter 11 is primarily for commercial businesses that wish to continue operations while repaying creditors through a court-approved reorganization plan. The debtor files a plan of reorganization within 120 days after the order for relief and provides creditors with a disclosure statement that allows the creditors to evaluate the plan.  The courts then decide whether to approve the plan that should return the business to profitability.

Plan options include:

  • reducing debts by repaying a portion of them while discharging others
  • discharging burdensome contracts and leases
  • rescaling operations of the business

If the plan is completed successfully, the debtor will have reduced debt and a reorganized — more profitable — business.

Chapter 12 Bankruptcy

This is available only to “family farmers” with regular annual income and who meet requirements relating to income, assets and debts. Similar to Chapter 13, Chapter 12 provides a period of debt repayment over three to five years and a trustee to oversee the bankruptcy process and payments to the creditors. Chapter 12 allows a family farmer to continue to operate the farm during the repayment period.

Chapter 9 Bankruptcy

This is available only to municipalities, such as cities, towns, villages, counties, taxing districts, municipal utilities, and school districts. Under Chapter 9 Bankruptcy, the municipality reorganizes and proposes a plan of repayment, similar to Chapter 11.

Contact Us for Help and Guidance

The experienced Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer know how frightening and confusing it can be to be faced with the decision of filing for bankruptcy.

We recognize that everyone’s individual situation is different, so we offer a FREE INITIAL CONSULTATION to evaluate your entire financial situation and make sure you are aware of all your options. We will examine your income, your debts and your goals and help you find the best and most affordable path to a brighter financial future.

Delaying can only make your situation worse, so take control of your financial future and learn more about how our firm can be of assistance today. Call one of our conveniently located office branches or email for your free consultation so we can determine what financial solutions will work best for you.

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