Although the intention of the U.S. Bankruptcy Code is to give consumers in Ohio and other states the opportunity to regain financial stability, it also wants to make sure that those who can pay at least some debts do not get them all discharged. That is the difference between Chapter 7 and Chapter 13 bankruptcies. Chapter 7 calls for liquidation of some assets to pay creditors and the discharge of unsecured debts, such as medical and credit card debts. Chapter 13 allows those with a regular income to reorganize their payments into a court-approved payment plan that allows a period of between three and five years to pay debts before remaining balances are considered for discharge.
Consumers must complete a means test to determine eligibility to file for Chapter 7 bankruptcy. A person will qualify for Chapter 7 if his or her income does not exceed the required amount. This is typically based on the median income of others in the filer’s state. Any person who does not earn a regular wage that would enable him or her to make some payments can file for Chapter 7. However, if an individual has had debts discharged in Chapter 13 within the most recent six years or in Chapter 7 bankruptcy in the past eight years, the filing will not be allowed.
Another circumstance that may prevent a person from filing for Chapter 7 bankruptcy is records of dismissed bankruptcy filings within the past 180 days. Dismissals may follow violations of court orders, fraud or removal after an application by a creditor to lift an automatic stay. As part of the bankruptcy filing, the consumer must complete mandatory credit counseling, and failure to do that may lead to the dismissal of an application.
Ohio consumers who are overwhelmed by debts may find that a consultation with an experienced bankruptcy attorney may answer many questions and clarify the mysteries of Chapter 7 and Chapter 13 bankruptcies. A lawyer can provide the necessary support and guidance from the onset — from the means test to the discharge of debts at the end of the process. With professional advice, a consumer may have a fresh financial start and be equipped with knowledge that may prevent similar situations in the future.
Source: FindLaw, “Who Can File for Chapter 7 Bankruptcy?“, Accessed on Nov. 5, 2016