Bankruptcy in Ohio
Many people have trouble paying their bills, especially when they lose their job. If you're drowning in debt and can't pay your bills on your own, you may have to file for bankruptcy. There's no magic formula for deciding when bankruptcy is the right choice. It's an option you might consider if you:
- Are paying only minimum amounts on your bills
- Can't budget yourself out of debt within five years
- Are getting notices that your mortgage or loans are being foreclosed
- Have had a severe financial setback, such as losing your job or a major client, a divorce or a costly illness
Bankruptcy doesn’t get rid of all debts. You’re still responsible for:
- Alimony
- Child support
- Most recent back taxes
- Most student loans
- Recent large purchases of more than $550 for luxury goods bought within 90 days of filing
- Fines or penalties of government agencies
- Fraudulent debts
- Cash advances of $825 within 70 days of filing
As a consumer, you can file for bankruptcy in Ohio under either:
- Chapter 7 (Straight Bankruptcy) to wipe out all debts except those listed and get an immediate fresh start or
- Chapter 13 (Wage Earner Bankruptcy) to set up a repayment plan to pay back your debts over several years' time.
Bankruptcy Abuse Prevention and Consumer Protection Act
On April 20, 2005, the President signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act, which limits individual access to US bankruptcy courts. Some of the changes, which were effective October 17, 2005, included:
- New bans on Chapter 7
- Increased Chapter 13 payments
- New presumptions against debtors with increased penalties
- The reduction of judicial discretion to balance competing interests
Chapter 7 Bankruptcy
Chapter 7, otherwise known as "liquidation," is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships. A trustee (appointed by the court) gathers and sells your non-exempt property and uses the proceeds from the sale to pay your creditors.
Most chapter 7 cases are "no-asset' case, which simply means that you do not have any non-exempt property for the trustee to sell.
Means Testing
Federal bankruptcy laws provide for a "means test," which will determine whether you're eligible to file for Chapter 7 bankruptcy. This test is used to limit Chapter 7 to those people who truly can't repay their debts. If your income is below the median income for families in your state, based on Census Bureau statistics, you'll be eligible. If you make more than the median income for families in your state, it must be determined whether your disposable income will cover your debts.
If you don't qualify for a Chapter 7 bankruptcy, your only option would be a Chapter 13 bankruptcy. Expenses, such as mortgage and car payments, are deducted from your average monthly income to determine your monthly disposable income. This amount is then multiplied by 60 to determine the amount you could pay over 5 years.
Visit the state median income page to determine whether you qualify for Chapter 7 bankruptcy.
You must also obtain approved credit counseling before you can file bankruptcy and file any overdue tax returns within weeks of filing a Chapter 7 bankruptcy.
Filing Chapter 7
A bankruptcy starts with the filing of the official petition, schedules and a "statement of financial affairs" with the bankruptcy court. In order to complete the Bankruptcy Forms, you must provide a list of all of your creditors and the amount and type of their claim; the source, amount, and the frequency of your income; a list of all of your property; and a detailed list of your monthly living expenses. The filing fee for chapter 7 is $299 ($245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge).
As soon as you file for bankruptcy, your creditors are prevented from trying to collect on your debts through what's called an "automatic stay." The stay is designed to preserve your property and to give you a break from litigation.
Anyone you owe - or anyone who wants to continue collection proceedings during the bankruptcy process - must show the bankruptcy judge, after a hearing, that there is "cause" to be allowed to continue with collection action (for instance, by showing that the property might deteriorate in value during the bankruptcy process).
The trustee takes control of any property you do not get to keep. From the sale of your property, the trustee pays the expenses of the administration of the case, and then gives any remaining money to creditors with allowed claims, according to the priority of the claims (with claims that are "secured" by property being paid first). Any wages you earn after you file the case are yours, beyond the reach of creditors who had claims on the date you filed for bankruptcy.
341 Hearing
Usually between 20 and 40 days after you file your petition, the trustee will hold the "first meeting of creditors" (also called a "341" meeting).You must be present for that meeting. The trustee can ask you questions under oath about your property and debts. Creditors can also question you on those subjects, but seldom do.
Generally, the only responsibilities you have with respect to the bankruptcy after the 341 meeting is to cooperate with the trustee in providing any requested information.
Creditors have 60 days after the 341 meeting to convince the bankruptcy court you shouldn't be allowed to jettison your debts.
