A comparison of Chapter 7 and Chapter 13 bankruptcies

With such a terrible economy, it is no surprise that many people are struggling financially. Unexpected events such as a job loss or sudden illness can cause even the most responsible people to fall behind on their bills. Many people struggling with mounting debt consider the possibility of filing bankruptcy. There are a few different bankruptcy filing options, but the most common types for non-businesses are chapter 7 bankruptcy and chapter 11 bankruptcy. Whether bankruptcy is right for you will depend on your specific situation.

Chapter 7 bankruptcy

Chapter 7 bankruptcy is often called "liquidation" bankruptcy. In a Chapter 7 bankruptcy filing, most, if not all, of the filers debt is discharged. This means that it is completely erased and the filer has the opportunity to start fresh.

Although many people believe that people who file Chapter 7 bankruptcy will lose their property, this is often not the case. Most of the time, a knowledgeable attorney can make sure that all of a person's property will be considered exempt from collection by the trustee, meaning that the filer will usually get to keep all of his or her property.

Unfortunately, not all types of debt are dischargeable through bankruptcy. A few common examples of debts that are more difficult or impossible to discharge include secured debts, school loans and tax debt. Secured debts are debts that are secured by a specific piece of property. For example, a car loan is a debt that is secured by a lien against a person's car. This debt will not be eliminated even in bankruptcy unless the person is willing to surrender his or her car to the lender.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is often called "reorganization" bankruptcy. During a Chapter 13 bankruptcy, the bankruptcy filer pays back all or part of his or her debts over a period of three to five years and can usually retain his or her property. After the three to five year period is over, most of the remaining debts will be wiped out.

One of the major benefits of filing a Chapter 13 bankruptcy is that it can people who may be facing foreclosure the opportunity to catch up on their mortgage payments because of the automatic stay that goes into effect once a bankruptcy petition is filed.

The automatic stay

One of the main reasons to file bankruptcy is to get the benefit of the automatic stay. Once a person files a bankruptcy petition, the court automatically issues an automatic stay that prevents creditors from taking any further action to collect debts the filer owes. This is incredibly helpful because it immediately stops creditors from garnishing a person's wages, levying a person's bank account and taking other actions to collect debts. This is a useful tool for stopping creditor harassment and can be used to postpone or prevent an eviction or foreclosure.

If you are considering bankruptcy

If you are struggling with debt and think that bankruptcy might be a good option for you, it is a good idea to speak with an experienced Ohio bankruptcy attorney. Whether bankruptcy is right for you will depend on your specific situation and an attorney can help explain all of your options.