The decision to file for bankruptcy isn’t always an easy one, but if you are dealing with overwhelming debt it just might be the answer you are looking for. As a Dayton bankruptcy lawyer, it is important to review all debt relief options before filing. If bankruptcy is the right solution, it is also vital that consumers have a firm grasp on both bankruptcy options available.
For many people, a Chapter 7 bankruptcy can provide quick relief from many burdening debts. Chapter 7 is typically reserved for those who cannot reasonably afford to repay their debts, which allows for those really struggling to find relief. However, to be eligible for Chapter 7 bankruptcy consumers must pass a “means test”, which evaluates the level of disposable income against the median income level of their state. Income levels below this threshold will qualify and allow for debtors to have their debts eliminated through liquidation of nonexempt assets or a creditor satisfaction requirement. Since Chapter 7 cases can be discharged with little to no repayment requirement, it doesn’t always serve all debts well. Secured debts that are tied to assets as collateral, such as a mortgage or car loan, are generally better managed in Chapter 13.
A Chapter 13 bankruptcy does take longer than a swift Chapter 7 case, but it offers benefits that compensate for the time line. There is no income restriction on Chapter 13 cases, which allows for people of just about any income level to seek help. However, there are some total debt caps in place to prevent millions from being wiped out in bankruptcy. Unlike the liquidation or creditor satisfaction order of a Chapter 7 filing, Chapter 13 rolls your debts into one affordable payment that is to be repaid over a period of 3 to 5 years. Upon completion of the payment plan any remaining debt balances are generally erased. Another benefit to Chapter 13 is that it allows for a wider range of debts to be managed, such as secured debts and priority debts. Also, debts that are generally thought of as ineligible for a discharge, such as taxes and student loans, may be eligible under certain circumstances to be included as part of the Chapter 13 repayment plan.