Which Type of Bankruptcy Should I File For in Ohio?
When debt is overwhelming, the law provides a solution. Bankruptcy is the opportunity to shed your current debts and start over with a clean slate. However, there are a few different bankruptcy types available to you. Choosing the right one will help you reach debt freedom more effectively within your resources.
Chapter 7 Bankruptcy
This is the most common form of bankruptcy. It is known as a liquidation bankruptcy because a debtor sells his or her non-exempt assets in order to pay off as much of their debt as possible. Certain items for survival are labeled as exempt by the court, but otherwise, almost all luxury or non-essential items are liable to be seized to pay off debts. Essential luxury items may need to be sold for less-expensive replacements.
Any remaining debt is discharged after asset liquidation. This option is best for parties who have no other means of paying off their debt, either through income or negotiation. Unfortunately, Chapter 7 bankruptcy remains on the debtor’s credit report for a decade after filing. For people who have no other recourse for debt freedom, however, this may be an acceptable price to pay.
Chapter 11 Bankruptcy
Often used by businesses, this type of bankruptcy is known as a “debt reorganization.” Businesses who file under chapter 11 are allowed to continue operations and gain revenue as long as they submit a reorganization plan within 120 days of filing. As a result, this bankruptcy is popular among businesses and people who want to maintain ownership of complex and numerous assets .
Chapter 11 allows debtors to work out a reorganization plan with their debtors, negotiate how much to pay back or discharge, and create a timeframe for repayment. The primary advantage of this bankruptcy is that debtors maintain ownership of their assets as long as their plan is submitted, continuing operations.
Chapter 13 Bankruptcy
This bankruptcy form is known as a “wage earner’s bankruptcy” because it allows for steady and consistent repayment of debt. For debtors who receive a fixed income, this may be an ideal solution.
Chapter 13 filers must work out a repayment plan with their creditors that takes between 3-5 years. If you are overwhelmed by collectors and creditor harassment, this type of bankruptcy gives debtors some room to maneuver. In addition, this type of bankruptcy is only on debtors’ records for 7 years, not 10.
If you have more questions regarding your debt, contact the Columbus bankruptcy lawyers at Wood & Brewer. We can give you clear answers in a free case consultation.