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Chapter 13 creditors' rights

Even as the nation's economy as a whole has improved over the past several years, many consumers in Ohio continue to struggle financially. This, in turn, can cascade down as a problem to businesses when consumers fail to pay their bills. When a person chooses to pursue a bankruptcy as a means of addressing financial problems, creditors can face unique challenges. Debts and any repayment are handled differently in Chapter 7 and Chapter 13 bankruptcies.

As explained by the United States Courts, creditors may or may not receive full repayment in a Chapter 13 bankruptcy or even in a Chapter 7 bankruptcy. While a Chapter 7 plan most generally sees a liquidation of assets or a repossession, a Chapter 13 plan takes a different approach. Select debts like those associated with the bankruptcy itself and taxes are granted priority to be paid in full through the bankruptcy proceeding.

Creditors of debts that are secured must ultimately receive a minimum level of payment equal to at least the current collateral value reflecting any depreciation. Creditors of unsecured debts like credit card balances or medical bills, repayment must only meet the threshold that would have been achieved through a Chapter 7 plan. Creditors are allowed to participate in a meeting of creditors with the Chapter 13 trustee and the debtor at which the exact repayment details may be ironed out.

If you would like to learn more about creditors' rights and obligations in a Chapter 13 bankruptcy, please feel free to visit the personal bankruptcy and creditors page of our Ohio civil litigation website.

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