Many residents in Ohio may not realize that there are multiple forms of consumer bankruptcy plans. Several people automatically associate Chapter 7 plans with all personal bankruptcies. These plans may be the best option for some debtors but not for all. The lack of knowledge about Chapter 13 plans may even prevent some people from reaching out for bankruptcy help as they may assume they will always lose their assets. This is not necessarily true.
As explained by the United States Court, a Chapter 13 bankruptcy plan may offer consumers the ability to retain and protect their assets from seizure. This is in stark contrast to a Chapter 7 plan where secured debts may be repaid by the loss of assets to the creditors.
In a Chapter 13 bankruptcy, a trustee is identified and this person receives monthly payments from the consumer. The trustee then distributes payments to each creditor per an agreed-upon plan and schedule. This clearly requires that the consumer is employed and earns enough money to make these monthly payments. For this reason, a Chapter 13 bankruptcy is often referred to as a wage-earner's plan.
Credit Karma notes that Chapter 13 bankruptcies last between three and five years. Payments must be made on time during the life of the plan. A Chapter 13 plan is essentially a form of restructured debt repayment. Some debts may get reduced and the consumer may pay less than what was originally owed. Repayment of debts may follow a priority order with things like child support taking precedence over credit card debt.