Read on to learn about the difference between Chapter 7 and Chapter 13 bankruptcy, two of the most common types of bankruptcy. If you believe that filing for bankruptcy may be an option for you, it is in your best interest to reach out to an experienced Ohio bankruptcy lawyer at Luftman, Heck & . An individual looking to file a Chapter 13 bankruptcy either have an asset that they would lose if they filed a Chapter 7, or they make too much income to file Chapter 7 bankruptcy. You’ll need an experienced Ohio bankruptcy lawyer. A Chapter 13 bankruptcy lasts between three to five years. A Chapter 13 bankruptcy is the only choice if you are behind on your mortgage or business payments and you want to keep your property, either in Ohio or another state, at the end of the bankruptcy process. A chapter 13 bankruptcy allows you to make up their overdue payments over time and to reinstate the original mortgage agreement.
Related videosChapter 13 Bankruptcy Explained - Step by Step
If your income is less than the median income level of your state, you may qualify for Chapter 7, or you may not. This is true, no matter what other websites may tell you. Every situation is different. I have seen numerous situations where people who pass the income test are not eligible for chapter 7.
If you have filed for bankruptcy in the past, you may not qualify for Chapter 7 unless a specified period of time has elapsed. If you had debts discharged in a prior Chapter 7 case, you will be required to wait at least 8 years before filing again; or wait at least 4 years after a prior Chapter 13 case.
These are typically done online. It is really just a review of your income and expenses. But it is mandatory, no matter what you call it. You may choose to reaffirm the debt if you want to keep the secured property and you plan on making the payments until the debt is paid off. A reaffirmation is a mutual agreement between you and the creditor and involves a signed agreement which will be filed with the court.
The court will determine the fair market value of the secured property and then you will pay this amount to keep possession of the property and pay off the security interest on the property.
Most mortgages cannot be redeemed, and many lawmakers believe this should be changed but so far no legal action has been taken. Redemption is not, as a practical matter, available for many people, because the fair market value has to be paid in lump sum, not in installments. If you cannot make the payments on the secured property and you are willing to let the property go then you can surrender the property. In most cases if the creditor has the property back you can have any balance owed eliminated through discharge.
A ride through is another option in some chapter 7 bankruptcy cases involving secured property. Many individuals make an assumption that filing for bankruptcy under chapter 7 means the automatic loss of their home, but this seldom the case. For many individuals, chapter 7 bankruptcy will allow a significant amount all, in most cases of personal property to be kept by the debtor, and this may include any home or home equity.
The available exemptions in your case, the amount of equity that you have built up in the home and other considerations are all examined by your attorney to be sure you will not lose any property. If have little or no equity in your home, and you may even owe more than the home is currently worth then the bankruptcy trustee will not try and take possession because your equity amount is nonexistent. If you do have some equity in your home and you file for chapter 7 bankruptcy, you may be able to use the homestead exemption to protect you against losing your home.
Creditors will receive 28 days' notice of the hearing and may object to confirmation. While a variety of objections may be made, the most frequent ones are that payments offered under the plan are less than creditors would receive if the debtor's assets were liquidated or that the debtor's plan does not commit all of the debtor's projected disposable income for the three or five year applicable commitment period. If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan "as soon as is practicable.
If the court declines to confirm the plan, the debtor may file a modified plan. The debtor may also convert the case to a liquidation case under chapter 7. If the court declines to confirm the plan or the modified plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor other than funds already disbursed or due to creditors.
Occasionally, a change in circumstances may compromise the debtor's ability to make plan payments. For example, a creditor may object or threaten to object to a plan, or the debtor may inadvertently have failed to list all creditors.
In such instances, the plan may be modified either before or after confirmation. Modification after confirmation is not limited to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor. The provisions of a confirmed plan bind the debtor and each creditor. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period.
Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor's ability to complete the plan. A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan.
In any event, if the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. The court may also dismiss or convert the debtor's case if the debtor fails to pay any post-filing domestic support obligations i.
The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge. A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: 1 certifies if applicable that all domestic support obligations that came due prior to making such certification have been paid; 2 has not received a discharge in a prior case filed within a certain time frame two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases ; and 3 has completed an approved course in financial management if the U.
The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor's homestead exemption. The discharge releases the debtor from all debts provided for by the plan or disallowed under section , with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.
As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U. Debts not discharged in chapter 13 include certain long term obligations such as a home mortgage , debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime.
To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded.
Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for restitution or damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case.
Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property as opposed to a person , debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.
After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a "hardship discharge. Generally, such a discharge is available only if: 1 the debtor's failure to complete plan payments is due to circumstances beyond the debtor's control and through no fault of the debtor; 2 creditors have received at least as much as they would have received in a chapter 7 liquidation case; and 3 modification of the plan is not possible.
Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are nondischargeable in a chapter 7 case. Background A chapter 13 bankruptcy is also called a wage earner's plan. Advantages of Chapter 13 Chapter 13 offers individuals a number of advantages over liquidation under chapter 7.
How Chapter 13 Works A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information: A list of all creditors and the amounts and nature of their claims; The source, amount, and frequency of the debtor's income; A list of all of the debtor's property; and A detailed list of the debtor's monthly living expenses, i.
The Chapter 13 Plan and Confirmation Hearing Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed. Making the Plan Work The provisions of a confirmed plan bind the debtor and each creditor. The Chapter 13 Discharge The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. The Chapter 13 Hardship Discharge After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan.
Notes The "current monthly income" received by the debtor is a defined term in the Bankruptcy Code and means the average monthly income received over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and including income from the debtor's spouse if the petition is a joint petition, but not including social security income or certain payments made because the debtor is the victim of certain crimes.
He or she makes regular payments to a Chapter 13 Trustee, who then pays the creditors over the period of the plan. The plan usually runs for a term of three to five years. An important and frequent use of Chapter 13 is to stop a home foreclosure and repossession. Debtors choose Chapter 13 when: They have debts that are not dischargeable in a Chapter 7 They are behind on car or house payments Their assets are not exempted They have a pending foreclosure Chapter 13 bankruptcy protects the debtor from collection efforts.