Individuals whose debts are primarily consumer debts have four options when considering filing for bankruptcy relief.  There are pros and cons to each case.  The particular facts of your current situation are important to make known to your attorney in order to make sure you file under the correct chapter.  The four bankruptcy options afforded to individual consumer debtors are Chapter 7, Chapter 13, Chapter 11 and Chapter 12.

Chapter 7 – Liquidation

Individuals who are having financial difficulties and are not able to re-pay their debts utilize Chapter 7 protection.  Under Chapter 7 a Trustee takes possession of all your property.  You may claim certain property as exempt under Ohio law.  The Trustee will liquidate your non-exempt property and use the proceeds to pay off your creditors.  The purpose of filing a Chapter 7 is to obtain a discharge of your existing debts.

Chapter 13 – Repayment of All or Part of Your Debts

Individuals with a regular and stable source of income who are temporarily unable to pay their debts utilize Chapter 13 protection.  These individuals pay their debts in installments over a 3-5 year period of time.  You are eligible for Chapter 13 if your debts do not exceed certain debt limits.

Under Chapter 13 you file a plan with the Court to repay your creditors all or part of the money that you owe them.  The Court must approve your plan before it takes effect.  Under Chapter 13 you may keep all of your property as long as you continue to make payments under the plan.  You receive your bankruptcy discharge upon the completion of your payment plan and the remaining debts that you owe are gone.

Chapter 11Reorganization

The principal purpose behind Chapter 11 cases is the reorganization of businesses but is also available to consumer debtors.  Its provisions are more complex then the two bankruptcy options above.  You should obtain the advice of an attorney if you are considering filing an individual Chapter 11 petition.  Most Chapter 11 cases are simply too expensive for the great majority of consumer debtors.  The majority of individual Chapter 11 cases that you will hear about involve entertainers and professional athletes.

Chapter 12 – Family Farmers or Fisherman

Chapter 12 is designed to permit family farmers or fisherman to repay their debts over a period of time from future earnings and is in many ways similar to a Chapter 13.  The eligibility requirements are restrictive, limiting its use to those who whose income arises primarily from a family owned farm.

Debts Remaining Regardless of the Bankruptcy Options

Even if you receive a discharge, there are some debts that are not discharged by law.  Therefore, you may still be responsible for debts such as certain taxes, student loans, domestic support obligations, criminal restitution, and debts for death or personal injury caused by operating a vehicle under the influence with alcohol or drugs.

Anyone looking for financial relief needs to understand their four bankruptcy options.  Making sure you file the correct way will help ensure your long term success.