The word bankruptcy means so many different things to every different person. For some it is simply a fresh start, for some it carries the stigma of failure, for some it inspires fear. The truth is that it a civil filing under the laws of the United States government to help people who are in financial distress get out of that situation No one is coming to your house to take your stuff, it will not be posted in the newspaper and you will get credit again.
There are two common types of bankruptcy for consumer debt. Consumer debt is debt incurred not as or for a business. The most common type of consumer bankruptcy is called Chapter 7. That is the chapter of the code that governs this bankruptcy filing. It is also a ‘liquidation’ bankruptcy. That means that if the filer owns an asset (car, house, bank account, investment account) that is not exempt under the State exemption law then the filer would have to compensate the creditors – through the trustee that is assigned to the case- for the non-exempt equity. The exemption laws of the State of Ohio are very generous and this is rarely the case The attorney you work with will help you understand the exemptions and risks prior to the filing of the bankruptcy. The filer who completes a successful chapter 7 bankruptcy generally keeps all of their assets and has all of their debts discharged. There are exceptions for some taxes and student loans. The typical Chapter 7 filer is able to purchase a house in 2-3 from the bankruptcy discharge and can buy a car immediately after discharge (assuming the filer has the income to support the purchases).
The other common type of bankruptcy filing is called Chapter 13. This is a filing for persons who have an income over the cut off for Chapter 7, who have an asset that they are behind on payments with and want to keep the asset, have student loans, child support or other debts that they need to keep paying through a bankruptcy. The length of this bankruptcy can go up to 5 years but generally not shorter than 3 years. The Plan, a document detailing the payments to be made to the creditors over the years of the Plan, will be approved by the court and the filer will make the payments for the length of the Plan. Upon successful completion of the Plan the debts eligible for discharge will be discharged. The Chapter 13 filing has many options and complications but can be a great help to the filer in rebuilding their credit and eliminating their debts.
The truth is that the laws of the United States are in place to help you get out of debt and move forward with better financial health. If you need the help there is no reason not to get out of debt.
