Why Do Some People Choose Chapter 13 over Chapter 7?

Chapter 7 is the most common form of bankruptcy and has certain advantages, but that doesn’t mean it is the best solution for you.  Depending on your situation, Chapter 13 bankruptcy, which allows you to consolidate your payments and repay some or all of your debt affordably over a three- to five-year period, may be more advantageous.

How do you know which form of bankruptcy is right for you?  If you are facing a situation where your debt is getting to be more than you can handle, there is help available. The experienced and compassionate Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer can help you decide the best option for your individual situation.

Delaying can only make your situation worse, so call or contact us online today for your free consultation to receive valuable, personalized insights on debt relief, with no further obligation.

What is Chapter 13 bankruptcy?

Chapter 13 is a consumer debt reorganization that enables debtors to repay financial obligations affordably in one monthly payment over a three- to five-year period. Chapter 13 allows you to repay a portion of your debt under better conditions and at lower interest rates than you originally had to pay. Unlike Chapter 7, which involves liquidation of assets, this process allows you to consolidate your payments to avoid fees and fines and to use future income to repay your creditors and keep your property.  Debts that may be consolidated include secured loans such as mortgages and balances on vehicle loans, as well as unsecured debts such as credit card debt and medical bills.

Under Chapter 13, the minimum amount you will have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you had filed for Chapter 7. Your repayment plan will be set up and approved by the courts.  Under the plan, you make regular monthly payments to a Chapter 13 Trustee, who then pays the creditors over the period of the plan.  The repayment varies from 1% to 100% of what is owed, depending on factors such as your income, expenses, and type of debt. Once you complete all necessary payments, any unpaid balances on dischargeable debts are discharged and you can keep your assets.

To file Chapter 13 bankruptcy, you must have a regular source of income and have enough disposable income to make your required payments.

Why People Choose Chapter 13

Here are some good reasons why you might file for Chapter 13:

  1. You aren’t eligible for Chapter 7 Bankruptcy.

Not everyone is eligible for Chapter 7 bankruptcy. Ohio has a “means test” you must pass before qualifying for Chapter 7. You will not qualify if:

  • Your current monthly income over the six months before your filing date is more than the median income for a household of your size in Ohio, and
  • Your disposable income, after subtracting certain expenses and monthly payments for debts you would have to repay in Chapter 13 bankruptcy, exceeds certain limits set by law.
  1. You want to save a home, car, or other property from foreclosure or repossession.
Additional Reading:  Bankruptcy Myths

Chapter 13 bankruptcy is often the best choice for homeowners with more equity in secured assets than they can protect with Ohio exemptions and who wish to keep these assets. Chapter 13 allows you to keep property when you’ve fallen behind on your payment by putting the payments into your monthly payment plan. The plan lets you make up the missed payments over time and keep your home or car. Chapter 7 bankruptcy allows you to keep only exempt property.

  1. You have secured debts that you cannot eliminate through Chapter 7.

Secured debts include car loans or non-dischargeable debts like tax debts or child support. These debts can be paid in full over three to five years at a reduced rate through your Chapter 13 repayment plan.

  1. You need more time to repay your Debts.

Once you file Chapter 13, there is an automatic stay provision that gives you relief from harassment by creditors, who must stop all collection activity during the term of repayment.

  1. You have a co-debtor on a personal debt.

Creditors will go after your co-debtor for payment in Chapter 7, but not in Chapter 13, as long as you keep up with your payments.

Contact us For Help and Guidance

If you find yourself at a point where you are considering Chapter 13 or any other kind of bankruptcy, take the first step toward debt relief and CONTACT US TODAY FOR A FREE INITIAL CONSULTATION.

During your consultation at Fesenmyer Cousino Weinzimmer, we will evaluate your entire financial situation and determine the best fit for your particular circumstances.  We will make sure you are aware of all your options and help you decide on the path to a brighter future that makes sense in your individual case.  We know the courts and the system and will walk you through the process every step of the way.

Delaying can only worsen your situation, so call or contact us online to set up your free consultation so we can determine what debt relief solutions will work best for you.

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