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Cleveland Sees Spike in Chapter 13 Bankruptcy Filings

A recent report has revealed a significant increase in bankruptcy filings for individuals with steady incomes in Cleveland in 2022, even as overall bankruptcy filings declined. When faced with overwhelming debt, individuals in Cleveland may consider bankruptcy as a means to regain control of their financial situations. Two common bankruptcy chapters for individuals are Chapter 13 and Chapter 7. Understanding the differences between these chapters is essential in determining the most suitable option. In this article, we will delve into the contrasting features of Chapter 13 and Chapter 7 bankruptcy, providing insights for Cleveland residents seeking debt relief with the guidance of experienced Cleveland bankruptcy attorneys.

Chapter 13 Bankruptcy: Repayment Plan for Financial Rehabilitation

Chapter 13 bankruptcy, often referred to as the “wage earner’s plan,” offers individuals with regular incomes in Cleveland an opportunity to restructure their debts while keeping their assets intact. Let’s explore the key features of Chapter 13 bankruptcy:

  1. Repayment Plan: With Chapter 13, individuals propose a three- to five-year repayment plan that considers their income and expenses. This plan ensures they can cover necessary living expenses while making consistent payments towards their debts.

  2. Debt Discharge: Upon successfully completing the repayment plan, individuals may be eligible for a discharge of remaining eligible debts. This discharge provides a fresh financial start, allowing individuals in Cleveland to move forward with reduced debt burdens.

  3. Asset Protection: Chapter 13 provides a mechanism to protect assets, such as homes and vehicles, from foreclosure or repossession. Through the repayment plan, individuals can catch up on missed mortgage or car payments and prevent the loss of these assets.

  4. Halting Creditor Actions: Filing for Chapter 13 triggers an automatic stay that stops collection efforts from creditors, including wage garnishment, foreclosure, and repossession. This immediate relief provides individuals in Cleveland with an opportunity to regain control of their finances.

Chapter 7 Bankruptcy: Liquidation for Debt Elimination

Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” allows individuals in Cleveland to eliminate most of their unsecured debts while surrendering certain non-exempt assets. Let’s explore the key features of Chapter 7 bankruptcy:

  1. Means Test: To qualify for Chapter 7, individuals in Cleveland must pass a means test, which compares their income level to the state median income. Those with incomes below the median may qualify for Chapter 7 without further scrutiny. Talk to an experienced Ohio bankruptcy attorney to see whether you qualify for Chapter 7 or Chapter 13 would be a better option.

  2. Asset Liquidation: In Chapter 7, a bankruptcy trustee may sell non-exempt assets to repay a portion of the individual’s debts. However, most individuals can retain essential assets, such as necessary household items, clothing, and a modest vehicle, through exemptions provided by state or federal laws.

  3. Debt Discharge: Following the liquidation process, eligible debts are discharged, relieving individuals in Cleveland of personal liability for those debts. Common examples of dischargeable debts include credit card debt, medical bills, and personal loans.

  4. Exemption Protection: Chapter 7 bankruptcy offers exemptions that protect certain assets from liquidation. These exemptions vary depending on state or federal laws and can be crucial in allowing individuals in Cleveland to retain their necessary possessions.

Choosing the Right Chapter: Factors to Consider

When considering bankruptcy in Cleveland, individuals should evaluate several factors, including:

  1. Income Stability: Chapter 13 is suitable for individuals with a regular income, while Chapter 7 is generally reserved for those with limited income or no means to repay debts.

  2. Asset Protection: If protecting assets such as a home or vehicle is a priority, Chapter 13 may be the preferred choice due to its asset retention provisions.

  3. Debt Discharge Goals: If the goal is to eliminate unsecured debts entirely and obtain a fresh start, Chapter 7 may offer a more expedient path for individuals in Cleveland.

Conclusion:

Understanding the distinctions between Chapter 13 and Chapter 7 bankruptcy is crucial for individuals in Cleveland seeking debt relief. Consultation with experienced attorneys is highly recommended to navigate this complex process effectively. These knowledgeable professionals can assess your financial situation, guide you towards the appropriate bankruptcy chapter, and ensure that your rights are protected throughout the process. With their assistance, individuals in Cleveland can make informed decisions and embark on a path towards financial recovery and stability.