When a person gets into a financial situation they can no longer control, they often consider filing for bankruptcy. However, what most people don’t know is there are several types of bankruptcies someone can file for. Most bankruptcy filings boil down to Chapter 7 or Chapter 13 Bankruptcy in Cincinnati OH. Which one is right for an individual considering bankruptcy will largely be determined by the results of a means test.
Taking a Means Test
When someone consults with a bankruptcy attorney to get the ball rolling on the bankruptcy proceedings, one of the first things the attorney will do is to administer a means test. This test is basically meant to establish a person’s verifiable income. From this, the determination will be made as to whether an individual qualifies for a lower income chapter 7 filing or if they have to resort to Chapter 13 Bankruptcy in Cincinnati OH.
The Nuances of Chapter 7
While chapter 7 and chapter 13 are both bankruptcy filings, the two are radically different. Chapter 7 wipes out a person’s revolving credit debt. There are instances where if the filer has extra sources of income or assets, those income sources will be collected or the assets will be sold to repay existing creditors. However, assets that are essential, such as person’s house and their main vehicles, will not be sold off. They are protected, but must still be paid for. Other debts will be forgiven by the courts if assets aren’t available to pay them off. This allows a person to start off with a clean slate, so to speak.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy is different because it considers the income levels of the filers. Repayment of some or all of the debt will be established through the courts. Negotiations between the courts, creditors, and the debtors will lead to a repayment plan lasting anywhere from three to five years. This could represent the entire amount of debt an individual currently has, or it could represent a reduction in the debt pursuant to the filer’s finances and income.
Understanding the difference between chapter 7 and chapter 13 bankruptcies will be helpful in you moving forward in your bankruptcy filing. If you have questions about this or other financial issues, Visit us online for more information.
