Chapter 7 vs Chapter 13

When it comes to determining which form of bankruptcy is right for you, there are many elements you need to consider for both your financial future and goals. Before you file, it’s important to know the pros and cons of Chapter 7 and Chapter 13 bankruptcy. But one of the main elements to consider is which do you qualify for?

How to Determine Qualifications For Bankruptcy in Ohio

To qualify for Chapter 7 bankruptcy, you must pass the means test. In essence, this test shows that your income is below the median income in Ohio. However, if you fail the means test, you still may qualify for Chapter 13, which is less restrictive.

Typically, most people will qualify for Chapter 13 bankruptcy because the only requirements are having a source of income and your total debt balances must be below certain amounts. For example, as of April 1, 2019, the limits are $419,275 for unsecured debt and $1,257,850 for secured debt.

Advantages to Chapter 7 Bankruptcy & Chapter 13

Though qualifying for Chapter 7 bankruptcy is a bit more restrictive, there are benefits to filing for it. Such advantages to Chapter 7 bankruptcy include:

  • Creditor collections stop immediately via the automatic stay
  • Most forms of debt are discharged forever

While these are great benefits, there are also advantages to Chapter 13 bankruptcy as well. The main benefit to Chapter 13 filings is that you are more likely to qualify for it as opposed to Chapter 7. Other advantages include:

  • If you are falling behind on mortgage payments, Chapter 13 allows you to catch up
  • You can couple your car payment into a repayment plan as to avoid repossession
  • You can pay your owed taxes over three to five years instead of all at once
  • You can pay behind alimony and/or child support payments overtime
  • Your non-exempt assets can be saved as long as they become part of your repayment plan
  • You can make student loan payments more manageable

It is important to know that even if you qualify for Chapter 7 bankruptcy but the elements of Chapter 13 are more appealing to you, you can still choose Chapter 13 to continue to pay off your debts. But, if circumstances arise, you may be able to convert your Chapter 13 filing to a Chapter 7. However, this is something you’ll need to address with a bankruptcy attorney.

Disadvantages to Chapter 7 and Chapter 13 Bankruptcy

As there are advantages, there are also disadvantages to filing for either form of bankruptcy. These are important to know as it can make a change in how you wish to proceed.

Disadvantages to Chapter 7 bankruptcy include:

  • You may lose some of your assets
  • You must take a credit counseling course
  • Chapter 7 bankruptcy will not remove a valid lien such as a mortgage or car loan

There are also disadvantages to Chapter 13 bankruptcy, the largest being that you must repay your debts in a set amount of time. For some, this is a time and financial commitment they do not wish to make, nor can they.

In addition, some elements of Chapter 13 bankruptcy you may wish to weigh include:

  • You still must take a credit counseling course
  • You must attend a meeting of creditors

Though these may seem like small things, it’s all valid and important in making the decision of which form of bankruptcy to file.

Know your Bankruptcy Options in Columbus and Central Ohio.

When it comes to filing for bankruptcy in Columbus and central Ohio, you need to know what options are available to you. If you are facing debts you can’t pay and are considering bankruptcy, learn more about how The Jones Law Firm can help you or contact us for a free consultation about your options.

Michael Ryan Jones

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Michael Ryan Jones is committed to assisting individuals facing financial distress. He has helped hundreds of clients achieve a financial fresh start by filing either Chapter 7 or Chapter 13 bankruptcy. When you hire The Jones Law Firm, you can be assured that Michael will personally assist you every step of the way.
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