Chapter 7 Bankruptcy
The Ultimate Guide to Chapter 7
All You Need to Know!
Need answers to your questions about chapter 7 bankruptcy?
Here’s your complete and comprehensive Ohio Chapter 7 Bankruptcy guide.
All the information you need to make the right decision, from a thirty-two year veteran Ohio bankruptcy attorney and certified credit counselor. No legalese, just straight talk and language that you can understand, and the answers that you desperately need.
I have been a practicing Ohio bankruptcy attorney for 3 decades, helping thousands of clients through chapter 7 bankruptcy, but that is not all I do. I am also a certified credit counselor as well.
You might use chapter 7 bankruptcy as the first step to your full financial recovery (but, as revealed below, it is just the FIRST step… there is more that needs to be done after bankruptcy to get the results you really need!). I have helped numerous bankruptcy clients get back on their feet financially after their bankruptcy has been discharged.
You need to:
- Rebuild good credit within a reasonable time after a bankruptcy discharge.
- Clean up credit reports, removing any incorrect or outdated entries.
- Achieve better credit scores.
- Learn to use credit responsibly.
I’ll show you how.
I created this comprehensive Ohio chapter 7 bankruptcy guide in order to help you understand what a chapter 7 bankruptcy can and can’t do for you. (and keep you from making the dumb mistakes I see so many people make – even when they have sought advice from an attorney).
And, I’ll give you critical information and advice which is mostly kept secret by most Ohio bankruptcy lawyers.
Helping you figure out if a chapter 7 bankruptcy is the right tool for your needs, the best path to your financial recovery, including rebuilding your credit, is my ONLY practice.
Is Chapter 7 Bankruptcy Right me?
That’s the $100,000 question.
The answer is… it depends.
We need to look at your big picture… your current debts and financial information, and your goals for the future.
Don’t worry at this point about the complex chapter 7 bankruptcy means test, exemptions, laws, requirements, and technicalities… these things just complicate the analysis and we will deal with them later, after you truly understand your entire debt and financial situation and have determined that a Ohio chapter 7 bankruptcy is the right tool for you.
The critical question at this point is whether your current income and debt levels allow you to cover your basic necessities and still leave something left over to pay off your debt in a reasonable time.
What are basic necessities? These include your:
- Other monthly payments and expenses which are necessary
What is a reasonable amount of time for you?
When it comes to debt repayment, I think that you should generally look at a 3-5 years time frame.
If you truly think you can get yourself out of debt in this time, and that, honestly, your income will allow you to pay for necessities and pay off your debt, then a Ohio chapter 7 bankruptcy is probably not the right tool to use. Get credit counseling and budget help instead.
If, however, your honest answer to this critical question is no – then a chapter 7 bankruptcy (or other bankruptcy type) could be the best solution.
Who Typically Files for Chapter 7 Bankruptcy in Ohio? (you, maybe?)
Sorry. This is a “trick” question.
There is no typical filer.
In over 32 years as an Ohio bankruptcy lawyer, I see these folks file chapter 7:
- Individuals with very little income.
- Clients who had incomes of $100,000 or more.
- Highly paid professionals including lawyers, doctors, and even judges.
- Blue collar workers.
- People with high monthly payments and expenses.
- Married couples.
- Single individuals.
- Car owners.
- People who owe auto loans.
- Childless individuals.
If you have higher income, you probably have larger expenses to match. And more debt. And, you may still qualify for the benefits that a chapter 7 bankruptcy offers.
So, it is impossible to identify a “typical” Ohio chapter 7 bankruptcy filer.. it could be anyone.
There are a million reasons to file. Nobody is immune from financial problems.
Sadly, I know from many years of experience that more people should consider chapter 7 bankruptcy – but many folks do not realize that this is even an option for them. So, they never even look into it. And, they suffer, and struggle, needlessly, not knowing that the answer they need is right under their nose.
Which is Better? Chapter 7 or Chapter 13 Bankruptcy?
The question is a “loaded.”
It assumes that one is better than the other.
It’s like asking which is better, a screwdriver or a wrench?
They do different things, and the answer is really, “it depends on what you need to do.
One of the most common bankruptcy myths is that a Ohio chapter 7 bankruptcy is always better than a chapter 13 bankruptcy.
Even some attorneys think this.
Some think that if you qualify for chapter 7, then you should not look at what a chapter 13 can do for you.
This is a horrible mistake, made by the ignorant, the inexperienced.
It is clearly not true for everyone!
But, many people believe it.
In fact, sometimes when I tell someone that chapter 13 bankruptcy may be the best choice in their situation – they initially feel disappointed, because they mistakenly believe chapter 7 bankruptcy offers more benefits, but this is not always the case.
They don’t understand that neither bankruptcy type is better or worse, but the real question is which chapter can provide the best results and a fresh financial start.
This depends on what they need, and their individual circumstances. There is no substitute for an experienced, veteran bankruptcy attorney’s full and detailed analysis of all options.
Your debts, needs, and finances will determine whether a Ohio chapter 7 bankruptcy or a chapter 13 bankruptcy is best for you.
In some cases a chapter 7 bankruptcy filing may be the best choice, but there may be obstacles for you, and sometimes filing chapter 7 bankruptcy is not possible.
For example, if you have previously filed for bankruptcy within 8 years then filing for chapter 7 bankruptcy may not be an option even if you meet all of the other requirements under this chapter of the bankruptcy laws.
In some cases a chapter 7 bankruptcy filing is not practical due to certain financial transactions you may have made. And, chapter 7 bankruptcy may also not be appropriate if you own property that is worth more than the bankruptcy exemptions which you are allowed, meaning that you could lose the property (this doesn’t happen often) or have to pay the chapter 7 trustee to keep your property.
And, just because you qualify for a Ohio chapter 7 bankruptcy – this doesn’t necessarily mean that this is the best possible solution to your debt and financial difficulties.
As a Ohio bankruptcy attorney I may tell you that even if you qualify and could file for chapter 7 bankruptcy, you might be better off using chapter 13 bankruptcy instead – it will do more for you than chapter 7 ever could. You would be “leaving money on the table” if you filed chapter 7.
Some attorneys do not advise chapter 13 bankruptcy even if it is a better option for the client because this can complicate things, and requires the lawyer to commit to a case for 3-5 years.
For these lawyers it is all about making a fast buck, not helping the client achieve true financial recovery, and I have had bankruptcy attorneys admit as much in private conversations. This is something they would never admit to their clients though.
I prefer to help my clients achieve a full financial recovery and fresh start, even if this means chapter 13 bankruptcy and partnering with the client for the next 5 years or even longer if needed.
This is the only way you’ll get the results that you need and deserve.
Do I Qualify for Chapter 7 Bankruptcy?
Many people do. More than think they would, actually, and that’s why too many don’t bother to even try to find out! They “assume” (and we all know what that means) that they can’t file chapter 7 and miss out on a fast financial recovery as a result.
Often, you will search the internet and do some research before you meet with an attorney. That’s OK, I even go to WebMD before I see my doctor sometimes. Unfortunately, I see people just get more confused sometimes by doing this.
The web is full of bankruptcy information that is misleading, complicated, or even flat out wrong.
The chapter 7 bankruptcy means test is often the first thing that individuals research. I have written an entire “Ultimate Guide” to the means test which will de-mystify it for you.
It’s probably not what you think.
What if you fail the chapter 7 bankruptcy means test? Does it even matter?
As an experienced Ohio bankruptcy attorney who understands the bankruptcy laws and requirements I know first-hand that it is possible to pass the means test and resolve debt problems using chapter 7 bankruptcy in many cases.
The Means Test for Chapter 7 Bankruptcy
The means test looks at all of the income that your entire household has, and all household income must be disclosed and considered.
The means test is supposed to determine if your income is enough to cover necessary living expenses and essential payments, plus pay off a meaningful portion of your debts within a reasonable amount of time.
If the results of the means test show that your income is sufficient for this purpose then chapter 7 may not be possible for you.
The bankruptcy means test is just one of many tests used to determine whether you qualify for a chapter 7 bankruptcy.
It is possible to pass the means test and still fail one or more of the other tests!
Sometimes completing the means test is not even required, but even this does not mean you automatically qualify for a chapter 7 bankruptcy case.
The bankruptcy court can still determine that you have enough income to pay off your debts in a reasonable time.
If this happens you will not qualify for a chapter 7 bankruptcy even though you passed the means test or it was not necessary to complete this test.
Many bankruptcy experts nationwide agree that the means test was a poorly designed law that just creates confusion. There are special circumstances which can make failing the means test irrelevant.
Once the court hears about the special circumstances then a decision could be made that your income is not sufficient to cover your necessities and any debt repayment within a reasonable amount of time, even if you fail the means test.
In this situation a chapter 7 bankruptcy discharge could be granted even though you failed the means test or you have an income above the allowable median amount.
What Debt Types are wiped out in Chapter 7 Bankruptcy?
There are many debt types that can be discharged with a chapter 7 bankruptcy.
These may include:
- Medical Debt
- Personal Loans and Credit Card Debt
- Collateral Loans
- Payday Loans
- Title Loans
1. Medical Debt
Medical debt includes debt owed to doctors, emergency rooms, hospitals, lab and testing facilities, and other debts incurred for medical diagnosis and treatment.
Typically discharging any medical debts that you owe will not prevent you from getting medical treatment in the future, but there are exceptions.
Discharging debts to a private physician using a Ohio chapter 7 bankruptcy could prevent you from using this physician in the future.
You should discuss your situation with your physician before you file. You can agree to pay off the debt and continue to use the same physician, but this debt must be listed in your bankruptcy petition.
Your physician is not required to keep you as a patient but my experience as a Ohio bankruptcy lawyer has shown that most will, as long as you agree to pay the debt even if it is discharged during the bankruptcy case.
There is nothing in the bankruptcy law that prevents you from making voluntary payments to your physician after your chapter 7 bankruptcy is discharged. The law only prevents the physician from trying to collect any debt that was discharged.
A lot of my clients choose voluntary repayment after their chapter 7 bankruptcy discharge so that they can keep their physician.
2. Credit Card and Personal Loan Debt
Personal loans and credit card debt are the most common debt types discharged under Ohio chapter 7 bankruptcy filings.
There is no collateral or security involved with these debt types, and no payment is typically required before the debt is discharged in bankruptcy proceedings.
It is important to understand that the creditor will usually close the account once the chapter 7 bankruptcy petition is filed, but after the bankruptcy is discharged you will normally be able to get credit without difficulty.
3. Collateral Loans
Collateral loans are offered by financial companies that include:
- American General
- Household Finance
- One Main Financial
- Eagle Loan
The loans offered typically involve high interest rates, and you must list personal property as collateral or security for the loan.
While the finance company can take the items listed as collateral if you file for Ohio chapter 7 bankruptcy, this rarely happens if the collateral is old, has lost it’s value or is, as a practical matter, not something the finance company can resell, like a mattress.
4. Title Loans
Title loans are completely legal in Ohio.
What happens when you file for chapter 7 bankruptcy?
In my career as a Ohio bankruptcy attorney I have found that title loans can be frustrating or even dangerous.
These loans usually have very high interest rates, and the creditor will often repossess the vehicle if the loan is not paid in full.
You could be stuck with the impossible choice of paying your living expenses and losing your car.
Losing your car can create a tremendous hardship. This can make your financial problems even worse.
Filing for Ohio chapter 7 bankruptcy protection can discharge any debt owed on a title loan, but the finance company will still have a security interest in the vehicle and the auto can be repossessed as a result.
If the loan payments are not made then you could lose your vehicle.
(note that we often use chapter 13 to solve this dilemma)
As an experienced bankruptcy attorney in Ohio, I might advise you to skip payments on your unsecured debt, such as medical bills and credit card payments, and to put this money towards paying off the title loan instead.
This is usually the safest route and will help you keep your vehicle while discharging other types of unsecured debt through chapter 7 bankruptcy.
5. Payday Loans
Filing for Ohio chapter 7 bankruptcy usually means that any payday loans you owe will be discharged.
Payday lenders make you sign numerous documents. Some of these make it seem like this debt can not be discharged through bankruptcy but that is generally not true.
There is a provision in the bankruptcy law that limits payday loans and cash advances to $825 maximum within a 70 day window before filing for chapter 7 bankruptcy.
As an experienced Ohio bankruptcy lawyer I can tell you that this is not always the case though. I have found that payday lenders rarely request payment even if the maximum amount is exceeded.
Payday loan repayment usually involves automatic deductions from your bank account as soon as your paycheck is deposited.
Payday loan creditors typically time the deduction so that your funds can not be withdrawn before the money is deducted from the account to pay the loan payment.
Payday loans that involve repayment using a post dated check can be just as difficult (or dangerous, if not done properly) to stop!
I can explain to you how to avoid problems with these. And, once the case is filed with the bankruptcy court these payday loan payments will be ended forever.
What about my car? Will I Lose it?
One of the biggest fears that you may have is that a chapter 7 bankruptcy filing will result in you losing your car. Relax! I have good news for you.
Your chapter 7 bankruptcy will discharge most of your debts. This, in turn, lets you to keep property valued at or below your exemption allowance for that property type, and be able to afford the payments on your car, if you want to keep it.
But, if the value of your car is significantly greater than the protection (called an exemption) for your car, then chapter 7 bankruptcy may not be the best solution to your debt problems and financial difficulties.
In Ohio you could manage to keep a vehicle valued at up to $5,000 (which you own free and clear) when you properly use all the possible exemptions in combination with a chapter 7 bankruptcy filing.
If your vehicle is paid off and worth more than this amount then a chapter 13 bankruptcy case may be a better choice, because you could be expected to give up the property or pay some towards the debt if the property is kept.
Everybody needs a vehicle to get to and from work, to run errands and pay bills, and to handle other daily responsibilities.
You might feel like many of my clients who told me that just the possibility of losing their vehicle kept them from considering a chapter 7 bankruptcy for a long time.
Filing for bankruptcy doesn’t mean you will lose your car.
If the chapter 7 bankruptcy exemptions do not cover the value of your vehicle then a chapter 13 bankruptcy filing may be necessary in order for you to keep your vehicle.
And, you need not be afraid of chapter 13.
Most of the chapter 13 cases I file for my clients when we have car equity issues end up being very close to a chapter 7. Their unsecured creditors get paid almost nothing.
Often one single penny on the dollar. I call this a “functional equivalent” to a chapter 7.
The bottom line is this: every month I represent clients in chapter 7 bankruptcy who own one or more vehicles that are paid off completely, and typically these clients keep their vehicles.
Under the bankruptcy laws your vehicles will fall into one of two categories:
Vehicles that still have debt attached
Vehicles that are fully paid off
If your vehicle is paid off then the current NADA of Kelly Blue Book value of the vehicle will be used as a starting point to determine the amount of equity that you have in this property.
Your car could be valued at more or less than the book value listed.
As I noted earlier the combined exemptions for each individual filing for Ohio chapter 7 bankruptcy protection is typically $5,000.
What this means is that generally if your vehicle has a NADA or KBB value of $5,000 or less then you should not lose your vehicle if you file for chapter 7 bankruptcy.
What if you still owe on your vehicle though?
In that case we will deduct what you still owe on your vehicle to pay off the loan from the value, and the difference is the equity that you have in the property.
For example if your vehicle is valued at $14,000 but you still owe $9,000 on the loan then you have $5,000 in equity, and your vehicle would be covered by combining all of the allowed exemptions.
You could keep your vehicle with a Ohio chapter 7 bankruptcy as long as your payments are current and you continue to make the loan payments when they are due.
If your vehicle has a value which is substantially higher than what is allowed under the chapter 7 bankruptcy laws then my advice as a Ohio bankruptcy lawyer would be to consider filing for chapter 13 bankruptcy instead.
How does the bankruptcy exemption offer protection for my vehicle?
Every individual who files for Ohio chapter 7 bankruptcy protection is allowed one vehicle exemption under the bankruptcy laws.
This means that the interest that you have in your vehicle is protected up to the allowed exemption amounts.
A joint chapter 7 bankruptcy by a married couple allows each spouse a vehicle exemption, and these can be combined as long as the title to the vehicle is joint.
This means that a married couple who jointly own a vehicle worth $10,000 with no debt attached can still keep the vehicle, because each spouse is allowed the combined $5,000 vehicle exemptions.
In this same situation what if one spouse owns a second vehicle that is worth $3,800? There are a few different options that can be used:
You could turn the vehicle worth less over to the bankruptcy trustee.
You could agree to pay the value of the vehicle, $3,800, to the bankruptcy trustee over a period of time, usually 6 months.
You could file for chapter 13 bankruptcy protection instead of using chapter 7 bankruptcy.
With a chapter 13 bankruptcy your debts could be discharged and you could keep your vehicles.
We can discuss all these, and other options, at a free consultation, if you have these issues.
Automobile Redemption: How Does it Work?
As an experienced bankruptcy attorney in Ohio, I frequently have clients who owe more on their vehicle then the property is actually worth.
Automobile redemption is one method that can be used which usually allows you to keep your vehicle and pay LESS than the debt that you actually owe on the property!
For example you own a 2014 valued at $10,000 but you actually owe $20,000 on the auto loan.
There are special finance companies, such as 722 Finance, which will provide vehicle redemption loans even though you are in chapter 7 bankruptcy.
In the same example you would take out a $10,000 vehicle redemption loan and then use this to pay the creditor the actual value of the vehicle.
You owed $20,000, you paid $10,000 with the vehicle redemption loan proceeds, and the $10,000 balance that exceeds the value of the vehicle would be discharged through your chapter 7 bankruptcy case.
Now you only owe the $10,000 to the special finance company.
Vehicle redemption loans can have interest rates as steep as 24%, but this is far better than owing two times or more what your vehicle is valued at.
IMPORTANT: You should not attempt to title your vehicle in someone else’s name so that you can file for chapter 7 bankruptcy without risking the loss of the vehicle.
Car Debt Reaffirmation
When you owe money on your vehicle and you file for chapter 7 bankruptcy the creditor will want you to reaffirm the debt if you want to keep the vehicle.
This process involves, essentially, “resigning the loan documents” and “affirming” that you plan to continue making the vehicle loan payments as they come due.
The loan terms and payment amount stays the same when you reaffirm the debt, and for this creditor it is like you never filed for Ohio chapter 7 bankruptcy protection.
Vehicle Purchases Before and After Filing for Chapter 7 Bankruptcy
Even before you file for chapter 7 bankruptcy you probably already know whether or not you want to keep your current vehicle with debt attached.
You may not want to reaffirm your vehicle debt, and you are not interested in vehicle redemption. You plan on letting the creditor have the vehicle back so you can be free of it.
Maybe your vehicle could have high miles or be in poor condition, and the debt greatly exceeds the vehicle value.
If you let the creditor take the vehicle what will you replace it with?
You need a vehicle to get around and handle daily responsibilities.
In this situation you have to decide whether to replace the vehicle before you file for Ohio chapter 7 bankruptcy or after. No two cases and circumstances are identical. We need to review the pros and cons.
Financing a vehicle purchase before you seek chapter 7 bankruptcy protection is usually easier than trying to get financed after you file the bankruptcy petition with the bankruptcy court, even if you have a low credit score.
After you file chapter 7 bankruptcy, many creditors will refuse to even consider a loan application from you for a minimum of several months after a bankruptcy discharge.
This could mean you go without a necessary vehicle during this time unless you plan ahead!
As an experienced Ohio bankruptcy lawyer I typically advise you to make the vehicle purchase before your chapter 7 bankruptcy petition is filed if you can.
The new vehicle debt will be reaffirmed during the bankruptcy process, and your old vehicle will be surrendered to the creditor during your bankruptcy case.
The vehicle returned may be auctioned off by the creditor so that some of the debt can be recovered, but you will be off the hook for the debt that is discharged.
The creditor can not try to come after you for any balance remaining on the discharged debt.
Will Chapter 7 Bankruptcy Affect My Home or Apartment Lease?
In my experience as a Ohio bankruptcy lawyer I have never had a client who lost a lease on an apartment just because they sought chapter 7 bankruptcy protection.
At times the apartment complex may require you to reaffirm the lease which is current, but even this is not typically required as long as your lease payments are made on time each month.
Of course, if you do not pay your rent after you file, then you can face eviction, the same as if you have never filed for bankruptcy in the first place.
Filing for bankruptcy protection will not cause you to be evicted though, as long as your payments are up to date and made in a timely manner.
In some cases breaking your current lease and moving to another residence may be a better option. This is true if you have a lease that you can no longer afford due to changes in your circumstances.
With Ohio chapter 7 bankruptcy you will be able to break your lease, find a residence that is more affordable, and use bankruptcy to discharge any lease payments and damage claims from your old landlord.
In this situation I might advise you to move before filing for chapter 7 bankruptcy protection. Any debt associated with the old lease will be listed and discharged during the bankruptcy case.
You might be worried about your ability to rent another residence if you file a bankruptcy petition.
Good news. This is usually not a problem.
In fact chapter 7 bankruptcy could make you more attractive to a potential landlord because you are debt free.
Discharging your debts in bankruptcy assures the landlord that there are no creditors waiting to snatch part of your income away, so your rent payments won’t be a problem.
YOU CAN KEEP YOUR HOME!
Filing for chapter 7 bankruptcy does not mean that you have to lose your home as long as you have an experienced bankruptcy specialist on your side.
The personal residence equity exemption in the state of Ohio for chapter 7 bankruptcy cases is approximately $132,000 per person.
A residence jointly owned by a married couple would be protected for about $264,000 during a Ohio chapter 7 bankruptcy.
Many older couples have worked hard and sacrificed to pay off their mortgage, but they also need the financial and debt protection that chapter 7 bankruptcy can offer.
Ohio bankruptcy exemptions have changed over the last decade, going from $5,000 per individual up to $132,000 per person, and this makes an enormous difference in the outcome for many bankruptcy clients.
What if I have no equity or my mortgage is bigger than my home value?
With plummeting home values you may find that your equity in the residence is small or even nonexistent.
You might be better off letting the residence go during the chapter 7 bankruptcy.
At the very least, I could explain how you could stay and pay, and not reaffirm the debt, so that you can walk away in the future if necessary.
It is rare for a mortgage to be reaffirmed during a Ohio chapter 7 bankruptcy, unlike loans for vehicles, because it is not a common practice to reaffirm mortgage debt.
As long as you continue to make the mortgage payments every month on time you will not lose your home for failing to reaffirm the mortgage debt.
Things will go on almost like you never filed for bankruptcy as far as your mortgage is concerned.
Understand That There is a Difference When it Comes to “Almost”
If you file for Ohio chapter 7 bankruptcy and do not affirm the mortgage debt this debt will be discharged, but the lien will still be attached to the property.
The mortgage will still need to be paid in order to eventually own the property free and clear and gain title to the home.
There is no legal obligation for you to pay the mortgage debt but failing to make required payments mean that the property will be foreclosed on and the mortgage lender will take possession of the home.
“Stay and pay” is a term that describes what we do when we continue making the mortgage payment each month but do not reaffirm the mortgage. When you do this until the mortgage is paid in full then the mortgage will be released and you will have clear title to your home.
You could also sell the property and use the sales proceeds to pay the mortgage off completely, so that the buyer gets clear title to the home.
If you make a profit off the sale after the mortgage debt is satisfied this profit is yours.
You need to understand that when your mortgage debt is not reaffirmed then payments made will not usually be reported by the lender to the credit reporting bureaus. Some mortgage companies do report your payments, but most will not.
This is because banks take the position that the discharge means you no longer owe the debt so any voluntary payments do not need to be reported to the credit bureaus.
Even though your voluntary payments may not be reported on your credit report, the up side is that the mortgage debt is also no longer reflected in your credit report because this debt was discharged and you no longer owe it. Your debt to income ratio will substantially improve as a result!
You instantly become much more “creditworth” when you don’t have that big mortgage debt showing as a debt you owe.
I can help you understand if the benefits of reaffirming your mortgage debt outweigh the negative aspects, and will tell you if you are better off not reaffirming any mortgage debt that you owe.
Land Contracts and Chapter 7 Bankruptcy
What if you have a land contract and file for Ohio chapter 7 bankruptcy?
Let’s look at this from the perspective of both the buyer and the seller.
If you are buying property on a land contract then chapter 7 bankruptcy allows you to use the exemption available for residential real estate to cover your interest in the property.
If you are selling property on a land contract then chapter 7 bankruptcy may not be the best option.
You could lose the property, and lose money too. I can advise you on other available options.
The law does not allow you to use a residential real estate exemption under a Ohio chapter 7 bankruptcy when you are the seller and there is a land contract. This means any equity that you have in the contract for selling the property may not be protected,
As the seller you are entitled to the payments outlined in the land contract, and these payments must be reported to the bankruptcy court. This could result in the loss of these payments when you file for Ohio chapter 7 bankruptcy.
Rental and business real estate do not qualify for the residence exemption under the chapter 7 bankruptcy law, so these property types would not be protected. Instead a chapter 13 bankruptcy may be the best solution.
Problems with Credit Union Debts
Credit union debts can pose difficult problems when you file for chapter 7 bankruptcy because of something called cross collateralization.
This is a practice that credit unions use to tie your assets and debts together.
For example, if you have a vehicle loan, and a personal loan, and a credit card through your credit union. All of the debts you owe to the financial institution are basically secured by the car, which is used for collateral for the car loan, of course, but the credit union often won’t explain that the car also secures the personal loan AND EVEN THE CREDIT CARD!
If you don’t make the credit card or personal loan payments on time, your vehicle may be repossessed!
And, when you try to discharge these debts in chapter 7 bankruptcy, the credit union will insist that you pay back the credit card and personal loan, or they won’t agree to let you reaffirm the car.
And this is true even if the vehicle loan payments are up to date.
This is legal even if it does not seem right.
Many people learn about cross collateralization the hard way, after the credit union empties their accounts and repossesses their vehicle. This usually leads to bounced checks, insufficient fund charges, late payment fees, and missed payments.
An experienced Ohio bankruptcy attorney understands the havoc that cross collateralization can cause during a chapter 7 bankruptcy case.
Credit unions usually do not allow debt discharge on the unsecured debts while allowing you to reaffirm any vehicle loan debt.
If you want to keep the vehicle you will usually have to pay all debts to the credit union in order to do this.
Most of the time the debts owed are more than the vehicle is worth.
Credit unions cannot legally be forced to allow you to reaffirm only the car and get rid of the other debts. They can force you to pay all the debt or surrender the car.
As a bankruptcy lawyer I often advise clients to give the vehicle back and get a new one before filing for Ohio chapter 7 bankruptcy protection. Or, alternatively, file chapter 13, with effectively “breaks” the cross-collateralization in most cases, and allows you to keep the vehicle, and still get rid of the other debt with the credit union.
Chapter 13 bankruptcy if often a better option when credit unions and cross collateralization are involved. A comprehensive chapter 13 bankruptcy guide can be found on my website.
Cosigners And Chapter 7 Bankruptcy
Cosigners can be big problems in Chapter 7.
Your debts get discharged, but any cosigners are not protected.
If you want to protect a cosigner when you file chapter 7, generally you are going to want to reaffirm, or continue to pay, the debt.
After a bankruptcy discharge you no longer owe the debt but this is not the case for any cosigners, they will still be on the hook unless you reaffirm the debt.
If your brother is a cosigner on your auto loan and this debt is reaffirmed your brother will not be affected, you are still responsible for the debt.
If you do not reaffirm the vehicle loan debt and it is discharged during the chapter 7 bankruptcy case then the lender can legally come after your brother for the debt that was discharged.
Any cosigners on your debts must be listed in the bankruptcy petition, and they will receive notice of the case from the bankruptcy court.
Other Debts in Chapter 7
Can Chapter 7 Bankruptcy Discharge Utility Debts?
Utility bills are considered unsecured debts under chapter 7 of the bankruptcy code, and they can be discharged during a chapter 7 bankruptcy just like medical bills and credit card debt.
After your bankruptcy case the utility company can (but often will not) charge a security deposit after a bankruptcy discharge, and if you have already paid a security deposit then this amount can be retained by the utility to pay down the debt involved.
Sometimes when you file for Ohio chapter 7 bankruptcy a utility company will discharge any unpaid debt up to the date that the bankruptcy petition was filed even if you do not have any unpaid or past due amounts.
This is the right thing to do but it does not always happen.
If your electric is due on the 30th but you file for chapter 7 bankruptcy protection on the 10th of the month then any amount charged up until the 10th should be discharged by the bankruptcy court.
This is true even if you do not list the debt in the petition for chapter 7 bankruptcy.
Rent to Own Debt and Chapter 7 Bankruptcy
Both chapter 7 bankruptcy and chapter 13 bankruptcy can discharge rent to own debt.
It is important to understand that rent to own companies use contracts which require you to return the property if the item is discharged during a bankruptcy case though.
As a Ohio bankruptcy lawyer I typically advise clients to return the property rather than reaffirm this type of debt and keep making payments because the items are grossly overpriced.
Occasionally a client may be close to having the item paid for though, and in this situation I would advise paying the item off rather than returning it because the debt owed is small compared to the item value.
Student Loans and Chapter 7 Bankruptcy
In theory it is possible at times to discharge student loan debt during chapter 7 bankruptcy, but the reality is that this is almost impossible to do.
This is true for both federal student loan debt and debt to private lenders.
For more information – google the Brunner Test for Student loans in bankruptcy.
Using the Brunner test, the court looks at three factors to determine if repayment of your student loans would constitute an an undue hardship, and possibly permit the discharge of some or all of your student loan debt.
As a Ohio bankruptcy attorney I explain to clients that being able to walk into court to argue their case means they have probably already lost, (since they were able to walk into court) and the student loan debt will normally not be eliminated through discharge in this situation.
If paying off student loan debt is truly impossible then I will recommend other possible options to clients.
A chapter 13 bankruptcy case may be more appropriate in this situation.
Student loan forgiveness from the lender without filing a chapter 7 bankruptcy case may also be possible, and I discuss the available options with bankruptcy clients to find the best possible solution.
As a Ohio bankruptcy specialist I have found that it is generally better to use the student loan process to deal with student loan debt rather than using chapter 7 bankruptcy. Some options include:
Student loan forgiveness
Income based repayments
Deferred payment programs
Private student loan debt is another story, and the relief programs listed above do not apply.
Private lenders know that chapter 7 bankruptcy will not discharge this type of debt, and they are very quick to sue as a result.
Instead you may be better off filing for chapter 13 bankruptcy. This will offer some protection for 3-5 years, giving you some time to discharge other debts and possibly increase your income.
Will I lose my tax refund?
chapter 7 bankruptcy can have a significant impact on your tax refund if you do not plan carefully and take this into consideration.
There is a small and limited amount of protection as far as tax refunds are concerned, but none of your earned income credit or additional tax credit refund can be taken by the trustee in chapter 7 bankruptcy.
The chapter 7 bankruptcy petition filing date is what counts, not the date when the tax refund is actually received. This date determines how much of your tax refund the bankruptcy trustee can try to claim.
I can help you analyze your tax situation and withholding to minimize the amount of your tax refund at risk.
True example (bad news for the unprepared)
Let’s say you file for chapter 7 bankruptcy and the bankruptcy petition is filed on June 30th. The year is half over. Your discharge will usually take place approximately 5-6 months after the filing date.
The bankruptcy court would be finished with your chapter 7 bankruptcy case by the end of December, and you will not receive your tax refund until the following year.
Imagine your surprise when you find out that the bankruptcy trustee wants to claim half the tax refund when you receive it, even though your chapter 7 bankruptcy case has been over for months.
There are some steps that we can take to limit the amount that can be taken from your tax refund, and these are completely legal.
As a Ohio bankruptcy attorney I analyze tax withholding and refunds for my clients in order to provide the maximum protection possible.
Remember that it is the bankruptcy petition filing date that counts, not the date when your tax refund is received.
Let’s say your tax refund is $5,000. Without any planning the bankruptcy trustee in your chapter 7 bankruptcy case could claim $2,500 of your refund minus your $800 exemption.
The $1,700 balance left could be claimed by the bankruptcy trustee as part of your bankruptcy case.
If $3,000 of your tax refund is coming from the Earned Income Tax Credit then this changes things. The $3,000 is exempt and has to be subtracted from the $5,000 refund total.
This leaves $2,000 of your tax refund, half of which the bankruptcy trustee can try to claim. Out of the $1,000 at risk your $800 exemption is deducted, leaving only $200 available for the trustee.
This is just one of many examples of the various laws and regulations that are included in the chapter 7 bankruptcy code, and there are many exemptions and exceptions that may be used to help protect any tax refund that you are entitled to.
As a Ohio bankruptcy lawyer I frequently help clients by performing tax withholding analysis so that a full and complete financial recovery is possible.
In the example above I would point out that the large tax refund means that the amount withheld for taxes is excessive and far more than what is needed.
In this situation the client may be better off with $416 per month in extra income rather than the larger sum once a year.
As a Ohio bankruptcy attorney I usually advise my clients to lower the amount of taxes withheld from each paycheck by changing their withholding exemptions.
This step will also lower any tax refund received, and minimize the amount that could be lost to the bankruptcy trustee during a chapter 7 bankruptcy case. Further adjustments can be made until your tax refund amount is close to zero.
Will I Lose Property When I File for Chapter 7?
No. Generally, most of my clients do not lose anything during chapter 7 bankruptcy.
The bankruptcy code actually protects your property, by providing you with an equity exemption for furnishings and household goods in the amount of approximately $10,000 per individual.
Your property will be valued at resale value, not the cost of the property brand new. This means if you hold a yard sale what could you realistically sell the property for?
Furnishings and household goods typically have a very low resale value. At the end of the day your property would probably not bring in $10,000 from the yard sale because it is used.
This usually means that most or all of your property will be covered by the $10,000 exemption for this property category during chapter 7 bankruptcy. As a Ohio bankruptcy lawyer I advise clients on how they can protect property during their bankruptcy.
Stocks and Bonds are Usually Not Protected During Chapter 7 Bankruptcy
In my experience as a Ohio bankruptcy attorney I have had many clients who have had employee stocks but were otherwise good candidates for chapter 7 bankruptcy.
Any stocks owned must be assessed for value, and there is no exemption available to protect stocks and bonds under the chapter 7 bankruptcy code.
Rather than risk the loss of these assets I work with clients to find another solution instead. This could be a chapter 13 bankruptcy filing or another solution instead.
Chapter 7 Bankruptcy and Estate Planning
Estate planning can create problems if bankruptcy is involved.
A common situation involves parents putting their real estate in the name of a child, sometimes reserving a “life estate” in the process. This is a common practice but it can have a substantial impact on any chapter 7 bankruptcy.
Probate issues can be avoided by titling property in the name of an adult child, while the parent usually maintains residence in the property.
Since the adult child does not reside in the home they can not claim an equity exemption in the property if they file for chapter 7 bankruptcy protection.
No simple solution exists for this situation, and extensive planning is needed to protect the property.
Simply transferring title to the property back to the parents is not possible during a set time period before you file for bankruptcy under chapter 7 of the bankruptcy code.
Any Ohio bankruptcy lawyer needs to be experienced in exemption planning on order to protect their clients, and this process is completely appropriate and allowed under the chapter 7 bankruptcy code.
Asset conversion is a big part of exemption planning. By converting assets that would be lost during chapter 7 bankruptcy into assets that are protected under the bankruptcy code I can help clients avoid the loss of these assets to the bankruptcy trustee.
One example would be a married couple filing a joint petition for chapter 7 bankruptcy, with $10,000 in cash and bank account balances. One possible solution would be to convert these funds into private IRAs.
Retirement accounts are usually protected in bankruptcy, so this type of asset conversion could protect the $10,000 from the bankruptcy trustee.
This is what proper exemption planning involves, and what I can help clients with as an experienced Ohio bankruptcy attorney.
Is my Retirement Account Safe?
In general, retirement accounts are protected during chapter 7 bankruptcy, but there are some exceptions.
The retirement accounts not protected under the bankruptcy code are usually not true retirement accounts and they do not meet the definition for this account type.
Say you invest in a specific mutual fund, with your goal being to use the fund proceeds during your retirement.
You may consider this a retirement account but the bankruptcy court will not view it the same way during a chapter 7 bankruptcy case.
Another exception to retirement account protection during chapter 7 bankruptcy involves inherited accounts. Courts have ruled that retirement accounts that you inherit may not be protected if you file for bankruptcy protection.
Do I go to court when I file Chapter 7 Bankruptcy?
No. We will attend a hearing, called a 341 meeting or “meeting of creditors” but creditors almost never show up. We are not in a courtroom and there is no judge. You won’t be on a witness stand. The process is pretty informal.
With proper preparation and attention to detail bankruptcy hearings are not significant. If there is a problem with your case then by the time a hearing takes place it may be too late to resolve issues and fix problems.
This is why you need a Ohio bankruptcy lawyer with experience in bankruptcy law and dealing with the bankruptcy trustee.
The last thing you need is a surprise during a 341 meeting, this could destroy your case and even force you to start over from scratch. I make sure that I understand all facts and circumstances before I even file a case, so where are no surprises later on.
Not knowing all the facts can lead to considerable loss for clients who file for chapter 7 bankruptcy.
I was in bankruptcy court for a case and watched the bankruptcy trustee grill a chapter 7 bankruptcy attorney about a personal injury settlement received by their client.
The bankruptcy lawyer knew there was a personal injury settlement, but did not realize that the settlement was inherited from the client’s deceased mother.
Chapter 7 bankruptcy typically offers protection up to $20,000 for personal injury settlements, but inherited awards may not be covered under this protection.
The lack of preparation by the chapter 7 bankruptcy attorney cost their client the settlement amount, and the bankruptcy trustee took the funds as a result.
I have an extensive array of checklists used in every chapter 7 bankruptcy case that I file, and these are double and triple checked before the bankruptcy petition is even filed.
As a chapter 7 bankruptcy lawyer this ensures that I am aware of all the facts and circumstances involved in your situation. This will prevent any unpleasant surprises and give you the maximum protection possible.
I believe it is not possible to be too prepared, and my clients deserve the best possible outcome from their chapter 7 bankruptcy.
Get a true specialist, not a “jack of all trades.”
Choosing the right chapter 7 bankruptcy attorney is critical if you want a favorable outcome and the best possible results from your chapter 7 bankruptcy case.
Once the bankruptcy petition is filed any errors or problems may not be fixable, and the damage is already done.
You cannot just stop the bankruptcy proceedings because you realize that you will lose property in the process.
Bankruptcy law is very complex and complicated, and you need an experienced bankruptcy specialist who understands how to navigate this legal area. This offers you a true fresh start and real financial recovery after your chapter 7 bankruptcy is discharged.
Look for a board certified bankruptcy specialist, one who is also a certified credit counselor. This will help you get the results and the financial recovery that you want and deserve.
Credit After Chapter 7 Bankruptcy
Chapter 7 bankruptcy is supposed to provide you with a fresh financial start, but – in truth – it’s just the beginning of the process you need rebuild your credit and correct your credit report.
Most chapter 7 bankruptcy attorneys are done with you once you get your final paperwork from the Court. I know that the job is not finished. There is much more to be done if you want a fresh start that includes recovered credit.
With me, you will receive a credit recovery program which I have developed after years of trials and testing, designed to quickly rebuild your credit.
I team up with you, support you and continue for months so that you will get the real fresh start that bankruptcy promises, but actually doesn’t deliver, unless you follow your discharge with a proven program to rebuild your credit score.
I am a certified debt arbitrator, certified credit counselor, and certified bankruptcy specialist. In fact I am the only chapter 7 bankruptcy lawyer in the State of Ohio certified in all 3 areas as far as I know.
These specialty designations and certifications simply mean that bankruptcy filings are just a part of how I help you. The credit rebuilding assistance and credit report correction I provide ensure you will get the full recovery you need, and not just a discharge of debts.
Law schools don’t teach attorneys anything about credit, and how to rebuild it after bankruptcy discharges the debt.
It is only natural for you to wonder about credit, and you may think (many people do) that chapter 7 bankruptcy will negatively impact your credit report and score for up to a decade to come, ruining your credit instead of rebuilding it.
This can certainly happen if you do not take steps to ensure credit report accuracy after your chapter 7 bankruptcy case is finished, or you fail to work on improving your credit scores.
You do not have to live with poor credit, there is a lot you can do to improve the outcome and really get a fresh financial start.
I have found in my experience as a Ohio bankruptcy attorney that a specific plan is crucial to great results once you have filed for chapter 7 bankruptcy protection.
It will take some effort on your part but you can have a high credit score, and qualify for low interest rates, within a year or two of your bankruptcy petition. I’ll help you with this.
Credit Report Monitoring and Correction After Bankruptcy is Essential!
After chapter 7 bankruptcy your credit report may be full of errors, showing that you still owe debts that were discharged in your bankruptcy case.
You do not legally owe these debts but often creditors do not update the information in your credit reports. This leaves these debts showing as owed when they are actually eliminated.
Creditors sometimes take the position that they have done nothing wrong, they state that they are not reporting that you still owe the debt.
In fact they usually do not report anything at all once you file a chapter 7 bankruptcy petition. We can make them go back and correct your credit report accounts so that they are accurate and up to date without too much trouble.
This is accomplished by properly disputing any incorrect or outdated debts and accounts listed in your credit reports.
As a Ohio bankruptcy lawyer I include credit disputing methods so that my clients get a true recovery and fresh financial start.
Credit Report Monitoring and Correction After Bankruptcy is Essential!
Some of my clients who have used credit repair companies report poor results from these firms.
As a bankruptcy and credit specialist I find that instead of a brute force approach used by most credit repair companies it is better to use a scalpel and actually target inaccuracies in your credit reports.
Credit repair firms often just file a blanket dispute every listing on credit reports. This is a poor practice, I think, and certainly not as effective as individual analysis.
As your chapter 7 bankruptcy lawyer I recommend that you only dispute entries that are incorrect which end up hurting your score.
Some errors on your credit report may not really hurt your score, and in fact some errors can benefit you instead.
Individual analysis of credit report entries will take more time than just disputing everything, but I have found it usually offers the best possible results and outcomes. I’ll show you how to do this.
How Long Will My Recovery Take?
It mostly depends on having the right program, and you following the steps.
I have the program. (As far as I know, I have the only program of it’s kind!)
You can easily follow the steps of this program. It really works!
Recovery after chapter 7 bankruptcy will vary from one individual to the next, and the time needed for this process will depend on the steps you take after your bankruptcy case is finished.
Your approach to bankruptcy recovery will determine how long it takes you to achieve this goal.
Some clients vow to only use cash, but this can actually hurt your recovery because you will not rebuild your credit or improve your credit score.
Proper credit use can help your credit score after a chapter 7 bankruptcy, but you need to be cautious because applying for too much credit too early in the process could have the opposite effect.
Instead, the right balance and best approach is needed to give you a good outcome after bankruptcy.
I’ll show you how to improve credit and recover from bankruptcy within a year or two.
At this point an auto loan, or possibly even a mortgage, with a lower interest rate should be possible as long as you have followed the plan we have created.
Within 3-4 years after filing for chapter 7 bankruptcy a mortgage should be easy to qualify for as long as the income requirements are met.
WARNING! DON’T DO THIS BEFORE TALKING TO ME . . .
As an experienced and knowledgeable bankruptcy attorney I advise potential clients about what to do, and what to avoid, before they file for chapter 7 bankruptcy protection.
Some things you should never do before you consult with a bankruptcy specialist in the months leading up to a chapter 7 bankruptcy filing include:
Making large financial transactions.
Making financial transactions that complicate your financial situations.
Liquidating retirement plans.
Transferring your property into the name of someone else.
Paying extra on any debts that you owe. Only make the normal payments to debtors.
Purchasing property without consulting a Ohio bankruptcy lawyer.
Giving away large sums of money.
I have advised clients to purchase a vehicle before they file for protection in some cases, because it was easier for them to obtain credit before the bankruptcy filing.
With over 32 years experience as a Ohio bankruptcy attorney I even have information about where clients can go to get a vehicle before their bankruptcy filing.
You can find more things that should not be done in the months leading up to chapter 7 bankruptcy on my website, and the list is extensive.
Between 60% and 70% of the cases that I handle as an Ohio bankruptcy attorney involve chapter 7 bankruptcy. This can be a very powerful financial reorganization tool when it is used properly.
Just because you qualify for chapter 7 bankruptcy this does not mean this is always the best solution though.
Sometimes a chapter 13 bankruptcy filing may be better. This chapter may offer better protection and more flexibility, as well as offering more options to protect certain assets and property types.
In order to get the information you need it is necessary to consult with an experienced bankruptcy specialist, one who fully understands this legal specialty and who can analyze your specific situation.
The internet is full of useless, misleading, and even deceptive information about chapter 7 bankruptcy, and this is not really much help.
Applying the means test and the results from this test can be tricky, and the exemptions allowed under the bankruptcy code can be complicated and difficult for individuals to understand.
Why waste your time and end up confused when a knowledgeable Ohio bankruptcy lawyer and debt specialist can advise you on the best solution to your debt and financial problems and answer all of your questions?
I have successfully filed for chapter 7 bankruptcy when clients could not pass the means test, or when the client income is above the median income amount.
As a Ohio bankruptcy attorney with close to 3 decades of experience I can quickly determine whether chapter 7 bankruptcy is the right choice or if another option may be a better solution instead.
Even a minor error could cause your case to be dismissed. This leads to a waste of time and money both.
Usually this dismissal is the result of a lack of experience and knowledge on the part of the Ohio bankruptcy lawyer, and the cost can be significant.
A successful case is complicated and complex, and bankruptcy alone does not give you a complete financial recovery. It is just the first step in a much bigger process.
Recovery after chapter 7 bankruptcy also needs to involve credit report correction and credit rebuilding after your bankruptcy discharge.
If you have considered chapter 7 bankruptcy then bankruptcy may be the right solution, but a chapter 7 filing may not be your best choice.
Sometimes chapter 13 bankruptcy will allow you to keep property that you could lose during chapter 7 bankruptcy, or result in less stress and a better outcome.
If chapter 7 bankruptcy is the best possible solution for you then as your Ohio bankruptcy attorney I can help you use this extremely effective tool to improve your financial situation, eliminate debt, and get started on a full financial recovery.
Your bankruptcy recovery may take far less time than you imagine when you follow my program for improving your credit after your bankruptcy case is discharged.