Most people in Ohio are feeling the pinch of the economic crisis less than most states, but personal bankruptcies are still being filed more than the national average. Since a large portion of the average person’s debt is due to student loans, which is typically not covered in a Chapter 7 or Chapter 13 bankruptcy, this is rather perplexing.
Debt Situation in Ohio
Ohioans are about average when it comes to their debt burden compared to other states, and the average credit score per person is a respectable 650. Ohio debt relief is still needed, however, mostly due to student loans and credit card debt.
The average Ohioan is $35,200 in debt, lower than the national average of $47,500, but still, that’s no small change. This includes mortgage and non-mortgage debt. Credit card debt is typically 17% of a household’s annual income, while student loans amount to an average of $27,713 per graduate.
Overall, Ohio residents have relatively stable financial health. For those who find their debts to be overwhelming, however, Ohio debt relief comes in the form of personal bankruptcies.
What are Personal Bankruptcies?
There are two types of bankruptcies that an individual can file. The first is Chapter 7, which is also referred to as liquidation because it involves the selling of non-exempt assets and property to pay off a portion of outstanding debt. To qualify for Chapter 7, the filer must have an income below the median wage in the state, or pass a means test which will indicate the inability of the debtor to pay off debts. Usually, a large portion of the debt is forgiven and the debtor can start fresh.
The second type is Chapter 13, which is also referred to as resettlement, because it is a court-mandated scheduling of debt payments based on the ability and capacity of a debtor to pay. No debt is forgiven, although there is a cap for the amount of annual interest a creditor may legally impose on outstanding amounts.
Bankruptcy as Ohio Debt Relief
In 2005, for every 66 Ohio residents in debt, one filed for personal bankruptcy. This is twice is high than the national average for the same year. The incidence rate has since dropped considerably, but it is still an option that many Ohioans have no problem considering. For student loans to be forgiven in a bankruptcy, however, very specific conditions have to be met. Bankruptcy lawyers would be able to advise a filer about this, as well how to best handle a bankruptcy so that the cost is not too excessive.