Understanding Chapter 7 bankruptcy can be difficult, and knowing whether to file Chapter 7 in your individual case is never easy either. No two people’s financial situations are the same.
Filing for bankruptcy is a way to get out from under your debts and regain control over your financial future. Although there are two types of personal bankruptcy cases, some people prefer the debt relief that Chapter 7 bankruptcy can offer. The following list is designed to empower you to:
- Better grasp if you qualify for Chapter 7 Bankruptcy
- Familiarize yourself with what secured property is
- Understand which debts can and cannot be discharged through Chapter 7
- Discover important facts about Chapter 7 Bankruptcy and your home
- Learn about complications in filing for Chapter 7 bankruptcy
Of course, if you are having financial difficulties then you should consult an experienced bankruptcy attorney. Preferably a board certified specialist. This legal specialist can offer invaluable advice to help you deal with your debt, fight on your behalf, provide a realistic view of the options, and help you choose the best course for your future. And so without further ado, here are: The 17 Things you MUST know about Chapter 7 Bankruptcy in Ohio.
1.Not Everyone Will Qualify
You may already know that in order to qualify for Chapter 7 filing status, you may have to pass what is commonly called the “means test.” Simply put, your income must be such that, after your housing, and living expenses, and payments on secured debts are made, there is not enough money left over to make a meaningful payment to your unsecured creditors. Contrary to popular belief, and contrary to what you will find on many other websites, including attorney websites, it is NOT TRUE that your income has to be lower than the median income for your state. And, of course it is much more complicated than just putting a few numbers into a formula, but, for the sake of simplicity here, it will suffice Whether or not you can file for bankruptcy under this chapter and retain possession of your home or other property will depend on numerous factors. And, even if you DO qualify for a chapter 7, you are often going to get a much better outcome if you elect to file chapter 13 instead.
2. Some Debts Don’t Go Away
These common debts cannot be discharged under Chapter 7 include:
- Student Loans. Whether you file for Chapter 7 or Chapter 13, student loans will almost never be discharged even with the help of a bankruptcy lawyer. However, it’s important to note that student loans can technically be discharged if they cause undue hardship, but this can be a difficult case to prove.
- Priority debts. Debts such as child custody, alimony, or any other type of support remain your responsibility after the Chapter 7 filing.
- Fines. Any costs accrued during the case such as attorney fees or fines and other penalties imposed from any governing body.
- Debt that is the result of illegal activity. If you have debt that has accrued because of illegal activity such as fraud, it cannot be discharged through a Chapter 7 bankruptcy.
3. Follow the Rules or Else
It’s crucial to understand the importance of correctly following bankruptcy’s procedure and court rules. Failing to do so as you file for Chapter 7 could result in the court refusing to discharge your debts, even if the debts would have otherwise been eligible for discharge. Furthermore, there are stiff penalties such as jail time and/or heavy fines for lying or hiding funds or property. Just this morning someone called my office wanting my help. They filed their own bankruptcy, pro se, meaning not with assistance of an attorney. The trustee told them, apparently, that there were “serious and significant” problems in their case. I don’t know the details, but they may be facing losing property, being referred for investigation, being sued by the trustee, or some other outcome that will be unpleasant for them. There are no “special rules” for anyone – even pro se filers are held to the same standards as attorneys.
4. The First Step: Means Test
This test evaluates your financial standing against a predetermined formula. Your disposable income (income after monthly expenses) will be measured to determine if you have sufficient income to repay some of your debts. If your disposable income is deemed insufficient you may qualify. But again, you need expert advice here. Chapter 7 is not better than chapter 13, and in some cases you will be better off in a chapter 13, even if you do qualify for chapter 7.
5. You’ll Need to Meet Ohio’s Income Criteria
But, its not as simple as just comparing your income to the median income level of your state of residence. If your income is less than the median income level of your state, you may qualify for Chapter 7, or you may not. There are many factors to be considered and there is, really, no “simple chart” you can consult to get the right answer. This is true, no matter what other websites may tell you. Every situation is different. I have seen numerous situations where people who pass the income test are not eligible for chapter 7.
6. If You Filed Bankruptcy Before, You May Have to Wait
If you have filed for bankruptcy in the past, you may not qualify for Chapter 7 unless a specified period of time has elapsed. If you had debts discharged in a prior Chapter 7 case, you will be required to wait at least 8 years before filing again; or wait at least 4 years after a prior Chapter 13 case.
7. Credit Counseling is Required
In order to obtain a discharge, you will be required to complete a debtor’s education course through a credit counseling agency. These are typically done online. As a certified credit counselor, it peeves me that the course is called a “credit counseling course.” In my opinion – it is far from that. It is really just a review of your income and expenses. But it is mandatory, no matter what you call it.
8. A Reaffirmation is One Option
You may choose to reaffirm the debt if you want to keep the secured property and you plan on making the payments until the debt is paid off. A reaffirmation is a mutual agreement between you and the creditor and involves a signed agreement which will be filed with the court.
9. Redemption Can Be Used for Secured Property
The court will determine the fair market value of the secured property and then you will pay this amount to keep possession of the property and pay off the security interest on the property. Most mortgages cannot be redeemed, and many lawmakers believe this should be changed but so far no legal action has been taken. Redemption is not, as a practical matter, available for many people, because the fair market value has to be paid in lump sum, not in installments.
10. You Can Surrender Your Property…If You Want To
If you cannot make the payments on the secured property and you are willing to let the property go then you can surrender the property. In most cases if the creditor has the property back you can have any balance owed eliminated through discharge.
11. Take a Ride Through
A ride through is another option in some chapter 7 bankruptcy cases involving secured property. Technically, this option doesn’t exist at all, but in practice it can be done, sometimes.
12. You Don’t Lose Your House
Many individuals make an assumption that filing for bankruptcy under chapter 7 means the automatic loss of their home, but this seldom the case.
13. You Will Keep Your Stuff
For many individuals, chapter 7 bankruptcy will allow a significant amount (all, in most cases) of personal property to be kept by the debtor, and this may include any home or home equity. The available exemptions in your case, the amount of equity that you have built up in the home and other considerations are all examined by your attorney to be sure you will not lose any property.
14. Underwater? You May Not Lose Anything at All!
If have little or no equity in your home, and you may even owe more than the home is currently worth then the bankruptcy trustee will not try and take possession because your equity amount is nonexistent.
15. Utilizing the Homestead Exemption Protects Your Home
If you do have some equity in your home and you file for chapter 7 bankruptcy, you may be able to use the homestead exemption to protect you against losing your home. Because the home is considered a secured debt you cannot eliminate the mortgage owed and keep the home, but if you continue making payments and reaffirm the debt then you will normally be able to keep the home.
16. Sometimes You Can Keep Non-Exempt Property
You may have assets that are not exempt from proceedings that you wish to keep. These non-exempt assets are largely at the discretion of the bankruptcy trustee who acts on behalf of the creditor; but there are ways to negotiate to keep some such assets.
17. Chapter 7 Isn’t a Game: But You Do Get a “Wild Card”
Bankruptcy law also allows a wildcard exemption that can be used for almost any asset, including your home equity. If the automobile exemption amount allowed does not fully cover the equity amount that you have in the car, then a qualified bankruptcy attorney may use the wildcard exemption to help cover any additional equity amount left.
Working with a bankruptcy lawyer is an incredible opportunity to discharge debts and experience a fresh start for your financial life. A bankruptcy lawyer has the expertise to maximize your rights and benefits reaped from a Chapter 7 filing. The bankruptcy attorneys at Richard West Law can provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances. Visit https://www.debtfreeohio.com or call (937) 224-3468 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.