If there is one thing that is constantly on our minds, it is money. Sure, health, relationships, and a nice job are all important, but without money, none of that matters. This is why some people work 2 or 3 jobs, while others invest any savings they have in different markets, hoping to get additional revenue. Unfortunately, things don’t always go your way, and you might still find yourself facing crippling debt. The problem with debt is that you keep sinking into it unless you find a way out as soon as possible. If that happens, you or your business might have to declare bankruptcy. Before you consider this action, you need to understand what it means and what the different types are.

What Is Bankruptcy?

This is a legal process used by people or businesses to help settle their debts and pay creditors back. It is overseen by bankruptcy courts and it entails a lot of intricate details that you need to be aware of. Taking this step might help end your debt, or at least minimize it. Before considering bankruptcy, you should know that it has some serious effects on your life and finances, meaning that it is not a decision to be taken lightly. It stays on your credit report for 7 to 10 years, depending on the case, and it complicates any financial process for you down the line–– from taking loans to getting new credit cards. So, what exactly are the available types of bankruptcy?

Chapter 7 Bankruptcy 

This is the traditional form of this process, which is why it is also known as straight bankruptcy. This type of bankruptcy focuses on secured debts, so you have to pay your creditors or your assets will be foreclosed. This applies to your properties unless they were exempt –– you can have your cars and some of your furniture, for example, declared exempt, so you don’t have to sell them. Any other non-exempt assets are surrendered so you can pay off as much of your debt as possible. This process is often supervised by a court-appointed trustee who will oversee the sale of your assets to pay creditors.

  • How Do you Qualify for Chapter 7 Bankruptcy? 

Well, this is the tricky part of Chapter 7 bankruptcy. The most important criterion for you to qualify is not having enough income for you to pay at least a part of your debts. Calculating this isn’t as easy as it sounds, and it is done by experts who have a formula of sorts so they can prove that you cannot really meet your financial obligations and are eligible for Chapter 7 bankruptcy –– if not, you have another choice which is Chapter 13 bankruptcy. 

  • What Happens After I Apply to Chapter 7 Bankruptcy?

Your life certainly won’t become any easier. You might be able to relieve yourself from debt, but the price is quite hefty. You will most likely lose property, and as mentioned earlier, the bankruptcy information will stay on your credit report for years. If you live in Cincinnati, or any other city/state for that matter, there are still debts that will not be eliminated by Chapter 7 bankruptcy, like college tuition, taxes, and child support. This is why you need a Cincinnati bankruptcy attorney to help you in this very difficult process. They will help you get back on your feet after this rough patch, and they will handle all the legal and technical aspects of the process for you, which is something you desperately need. In a way, bankruptcy can offer a fresh start for many people, but you need professional legal help to get started on that path. 

Chapter 13 Bankruptcy 

Chapter 13 bankruptcy is a bit different from Chapter 7. Here, you don’t pay off all your debt, and you also get to keep some of your assets. The purpose of this type is to restructure your debt to make it more manageable. You can do that by making changes to your payment plan, which will allow you to eliminate a part of your debt through manageable payments. 

  • How Does It Work? 

In Chapter 13 bankruptcy, you usually spread your payments over a longer period of time, and this results in you paying less money, whether that is weekly or monthly. What happens here is, your attorney and bankruptcy court will get together with the creditors to create a payment plan, which usually lasts from 3 to 5 years. The deal might entail you repaying your entire debt, or a certain part of it during the timeframe. In any case, after that period expires, along with your payments, your debt is discharged even if you didn’t pay the initial amount that you owed. 

Which Is a Better Option? 

Well, Chapter 13 bankruptcy is obviously a better option. The trustee and the judge will determine whether the payment plan suggested by your attorneys is fair to the creditors or not. If they sign off on that plan, it goes through, even if your creditors don’t approve of it –– though it makes things easier if they do. In any case, if the judge signs off on the plan and thinks it is fair to the trustees, you’re good to go. On the other hand, with Chapter 13 bankruptcy, you get to keep some of your assets, and you might end up paying some of your debt, not all. One more favorable angle to this type is the fact that it expires from your credit report after 7 years. More importantly, you can file again using the same Chapter after only 2 years –– as opposed to Chapter 7 where you have to wait for 8 years.
types of bankruptcy
Going through bankruptcy is anything but easy or simple. It is a grueling process that you cannot go through on your own. If you’re really considering it, make sure you enlist the help of qualified attorneys who can walk you through this step by step. They would advise you on the best approach to follow, and their insight and expertise will prove paramount in lifting the burden of debt off your shoulders.

Website | + posts