An Ohio resident who is dealing with financial challenges may wonder about the bankruptcy options available if it seems impossible to catch up with outstanding debts. It is important to understand that Chapter 7 bankruptcy offers the ability to liquidate certain types of debt. An individual, a married couple, or a business might use this approach, but there may be more appropriate options if liquidation is not desired because nonexempt assets may be sold in order to pay off some of the debts in such a situation.
Prior to filing Chapter 7, a candidate must go through a means test to determine whether this approach would be considered appropriate. In some cases, Chapter 7 might be viewed as an abuse based on monthly expenses and amount of debt. However, an exception might be possible in special circumstances. If Chapter 7 is deemed to be an abuse, a filing may be converted to Chapter 13, which is a repayment approach to debt resolution.
In addition to filing a bankruptcy petition, a candidate for Chapter 7 must provide a schedule of assets and liabilities along with a schedule of income and expenses. Additionally, a statement of one's financial affairs must be provided. Further financial information such as tax returns must also be provided. Filing fees need to be paid although they may be waived if one's income is below 150 percent of the poverty level. A Chapter 7 filing stays collection action in most cases, but there are some types of debts that are excluded from liquidation and not subject to such a stay of collection.
Because errors in filing for bankruptcy could result the denial of a petition, it may be important to work with a bankruptcy lawyer to ensure that no steps are missed in the process. That lawyer may also be able to help a client understand the ramifications of the filing and could help him or her weigh the benefits and drawbacks of the action.
Source: United States Courts, "Liquidation Under the Bankruptcy Code", September 15, 2014