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Chapter 13 bankruptcy reorganizes debt and protects assets

The problem of overwhelming debts is not limited to people in Ohio with low or no income. People earning higher incomes sometimes get overextended and face difficulty keeping up with debt payments. Bankruptcy law recognizes this scenario and enables relief through a reorganization of debts under the terms of Chapter 13. During the process, a bankruptcy court imposes a three or five-year payment plan designed to fit within the debtor's income without forcing the liquidation of property.

The law does impose upper limits on the amounts of debt that a person can owe and still qualify to file for a reorganization bankruptcy. Unsecured debts cannot exceed $419,275, and secured debts cannot go above $1,257,850. As long as a person's debts do not rise above these thresholds, a bankruptcy court could approve a petition for Chapter 13 protection.

A filing must include documentation that a person has filed tax returns at the state and federal levels for the previous four years. A failure to provide this evidence may cause a court to dismiss the petition. The court will also ask a filer to complete a credit counseling program before creating a payment plan that fits the person's monthly budget. The court decides whether the plan will last for three years of five years. At the end of the repayment period, the court could discharge any leftover balances owed to creditors.

Seeking relief in bankruptcy court might prevent a person from raiding retirement funds or falling further into financial hardship. An attorney knowledgeable about Chapter 13 might prepare financial disclosures for the court and submit the repayment plan for the court's approval.

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