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Forbearance could affect bankruptcy filings in Ohio

When considering debt relief options, there may be many aspects of an Ohio resident's financial state to consider. For instance, if an individual has entered into forbearance -- a deferred payment plan -- with a lender, that plan could affect a person's debt management options. If that individual wishes to file for bankruptcy, forbearance could potentially have a considerable impact.

Because forbearance is a contract that has been entered into by the borrower and the lender, many lenders may argue that a bankruptcy filing violates that contract. This issue more commonly arises with mortgage lenders as bankruptcy generally halts foreclosure on a property. However, these lenders may take steps to continue the foreclosure despite bankruptcy, and in many cases, the court may approve such action in cases of forbearance. 

Forbearance does not necessarily mean that a bankruptcy is out of the question. However, individuals interested in this option may wish to ensure that they will be able to keep up with the terms of their filing. For example, Chapter 13 bankruptcy involves a court-approved repayment plan, and if individuals do not make their required payments, their bankruptcy could be dismissed or changed to Chapter 7 liquidation.

If Ohio residents are concerned with how a forbearance may affect a potential bankruptcy filing, they may wish to consult with an experienced attorney. By gaining more information on potential complications and needed steps to effectively carry out their filing, individuals may be able to utilize bankruptcy to get their finances back on track. Additional information on Chapter 7 and Chapter 13 proceedings may also help interested parties determine whether this debt management option fits their circumstances.

Source:, "Considerations of Forbearance in Bankruptcy", May 17, 2016

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