Bankruptcy is a federal law which affords legal relief from your debts. There are five main chapters of the bankruptcy code, but the three main chapters utilized by consumers and businesses are chapter 7, chapter 11 and chapter 13.
With a chapter 7 bankruptcy, your legal obligation to pay your debts is extinguished. From the time your case is filed with the bankruptcy court, the "automatic stay" goes into effect meaning all collection action against you must stop. Types of actions your creditors are not allowed to take include:
You can receive a bankruptcy discharge once every eight years. No one can make you repay a debt which has been discharged in a bankruptcy. In exchange for a discharge of your debts, you must give the bankruptcy trustee any valuable property that you own so that he/she can turn the property into cash in order to pay your creditors a portion of what they are owed. So that you don't leave bankruptcy court with no property at all, you are permitted to keep some of your property. That property is known as "exempt property" and is determined in accordance with the laws in the State of Ohio. Most people who file for chapter 7 bankruptcy keep all of their property.
With a chapter 13 bankruptcy, your debts are reorganized with a payment plan which can last up to 60 months. Chapter 13 is for people who are overwhelmed with debt who have had a bankruptcy discharge within the past eight years, people who have property they would lose in a chapter 7 ("non-exempt property") and for people who do not otherwise qualify for a chapter 7 bankruptcy.
Chapter 11 bankruptcy is for businesses overwhelmed by debt who would like to remain in business. Chapter 12 is for a full-time family farmer and chapter 15 is for a municipality. Patricia Kovacs handles these matters but these situations probably do not apply to you.
Every individual who files for bankruptcy must complete a "pre-filing counseling" (known as a "briefing") with an approved provider. This requirement can be completed online in the privacy of your home by any number of providers approved by the government. Our office recommends Access Counseling and their website is accessbk.org.
Patricia A. Kovacs is an attorney who helps people and businesses file for bankruptcy relief under the bankruptcy code.