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No two financial situations are exactly alike, so the law provides different bankruptcy options for borrowers unable to repay their debts. Chapter 7 and chapter 13, the two most popular programs for private individuals, both provide powerful protections for struggling debtors, including the ability to discharge unsecured debt and put an immediate stop to all collections activity. The best option for you depends on your long-term goals, what types of debt you carry, and a variety of other factors.

The Difference Between Chapter 7 & Chapter 13 Bankruptcy

Chapter 7 Liquidation

bankruptcyChapter 7 bankruptcy, also known as a “liquidation,” is the most popular of the two options. Upon discharge, a chapter 7 bankruptcy eliminates most unsecured debt, including medical bills, credit cards, personal loans, and even some back taxes. However, in exchange, you may be required to surrender some of your assets, which will be sold to repay your creditors. To qualify for chapter 7 bankruptcy, borrowers must pass a means test to demonstrate that they are incapable of paying their debts.

Chapter 13 Restructuring

Unlike chapter 7, chapter 13 bankruptcies are designed for borrowers experiencing temporary financial problems. In addition to discharging unsecured debts, a chapter 13 bankruptcy allows you to restructure your finances through a court-managed repayment plan. While chapter 13 doesn’t require you to surrender your property, the repayment plan must provide unsecured creditors with at least as much as they would have received if you had filed for chapter 7.
 

For nearly 40 years, the bankruptcy attorneys at Ibold & O'Brien have provided detailed guidance and reliable legal advice to struggling borrowers throughout Geauga and Ashtabula counties. Their consistently high level of service and in-depth expertise has earned them a Super Lawyer designation, as well as an AV rating from the prestigious Martindale-Hubbel®. For a consultation with an award-winning attorney, call their offices at (440) 285-3511 or visit their website today.

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