Unless you happen to be a bankruptcy lawyer in Dayton Ohio, chances are good that the difference between these two types of bankruptcy is confusing. It’s important to know what they mean to properly decide which best applies to you. A skilled bankruptcy lawyer will give you a thorough explanation of each kind and tell you which is best in your situation. Here are some basics to get started.
This is what most people think of when they talk about bankruptcy and is frequently called straight bankruptcy. It may be filed by a person, a partnership, or a company with the help of a bankruptcy attorney and simply wipes out all debts. There isn’t a repayment plan as all debts are removed from the credit history. You may be forced to relinquish some of your possessions to cover the debts, but there are certain things that may be exempt, and anything purchased after declaring bankruptcy is free from repossession. To qualify, you must earn less than the median income for the state or, if you make over that amount, pass a new Means Test.
The main difference of Chapter 13 bankruptcy declaration is that it involves a repayment plan during which all or part of the debts are repaid over a period of time, usually 3–5 years. The plan must be reasonable enough to allow the debtor to survive while paying off the debts. It must also pass the best interest test, proving that creditors will receive as much as or more than they would by filing for Chapter 7. There is also a best-efforts test requiring that any extra wages, after expenses are paid, go to the creditors for at least the first 3 years.