When most people think of "bankruptcy," they are thinking of Chapter 7 bankruptcy, where a debtor's non-exempt assets are sold, the money is used to pay creditors, and then the remaining debts are discharged. But another very common type of bankruptcy is Chapter 13. Under Chapter 13, the debtor's assets are not sold, and a payment plan is set up under which the debtor pays off their creditors. Down the line, some debts may be discharged.

Both types of bankruptcy have their advantages and disadvantages. Some people cannot qualify for Chapter 7 because their income is too high, so Chapter 13 offers the only relief. Also, people who own valuable non-exempt assets that they don't want to lose may choose Chapter 13 bankruptcy, even though it does not have the (relatively) quick discharge of debt that Chapter 7 offers.

Cincinnati Chapter 13 bankruptcy attorneys will tell you that the choice of which type of bankruptcy relief to pursue is an important one. Choosing the least advantageous form of relief can leave a debtor without the true fresh start that bankruptcy is intended to give.

That is why it was disheartening to hear about a recent study that was done in a major American city, which found that in many predominantly black communities, people were choosing Chapter 13 at a higher rate than in white communities.

There are many reasons why people might make different choices about the type of bankruptcy relief to pursue, but the study found that among black and white debtors with the same income, blacks were more likely to choose Chapter 13.

The researchers could not state a definite conclusion about why this was happening, but they did speculate that perhaps many people in African American communities were not receiving good advice about the advantages and disadvantages of Chapter 13.

Knowing the differences in types of protection is important. Every debtor seeking financial relief through bankruptcy deserves to receive the full advantages of a fresh start, and to emerge from bankruptcy in the best financial position possible.

Source: Bankruptcy Beat "Studies Find Racial Discrepancy in Chapter 13 Filings" 5/12/2011