Bankruptcy is a means by which a person or business may discharge the debts owed to creditors without paying them. Once a bankruptcy is filed, all the debtor’s creditors must refrain from proceeding with any action to collect a debt without first obtaining permission from the Bankruptcy Court. The goal of a Chapter 7 bankruptcy is that you, the debtor, receive a fresh start.
The Difference Between Chapt 7 and Chapter 13
Chapter 7 is a liquidation for both individuals and corporations. Chapter 13 is a reorganization plan for a consumer debtor. Generally, bankruptcy debtors who participate in a Chapter 13 are required to be wage earners.
Under Ohio exemption law, a bankruptcy debtor has a homestead exemption on their home for $20,200* and a motor vehicle exemption for $3,225* (*specific dollar amounts are subject to change with changes in the law). That means if the bankruptcy Trustee decides to liquidate (sell) your property, you can protect your portion of the equity in that piece of property up to the allowed exemption amount.
If you want to keep (reaffirm) a secured loan, such as a house mortgage or car loan, you should try to stay current on those loans. It is important to discuss your asset and exemption structuring with your attorney well in advance of being pushed to the unfortunate point of having to file bankruptcy. Under certain circumstances, filing bankruptcy is the responsible thing to do in light of a financially impossible situation.
How The Law Has Changed Recently
In October 2005, the United States Congress drastically amended and changed the Bankruptcy Code. The new law is called the Bankruptcy Abuse and Consumer Protection Act of 2005. Under the new law, if debtors have an income above the state median income, the “means test” is used to decide whether a “presumption of abuse” will exist and, therefore, the Court will not allow the debtor to file a Chapter 7 liquidation. Instead, the debtor would be required to file a Chapter 13 consumer reorganization.
In addition, the new law requires that in order to be eligible as a bankruptcy debtor, an individual must receive consultation from an approved non-profit budget and credit counseling agency within six (6) months before filing bankruptcy. The U.S. Trustee’s Office for the Southern District of Ohio determines what agencies are on the approved list. Then, the debtor must complete a second approved instructional course about personal financial management in order to obtain a Chapter 7 or 13 discharge.
General Bankruptcy Rules Or Warnings
A bankruptcy debtor must list all assets, creditors and liabilities. A debtor must treat all of his or her unsecured creditors equally. A debtor cannot pay any unsecured creditor more than a total of $600 in the 90 days before filing bankruptcy. (This does not include house mortgages and car loans.) This 90 day rule can be extended to 1 year or more if the creditor is considered an “insider,” such as a business partner or family member.
In addition, a presumption of fraud will arise if the debtor acquires a debt in one creditor for buying more than $500 in luxury goods during the 90-day period prior to the order for relief, or the debtor receives cash advances of more than $750 from an open-end credit account during the 70-day period prior to the order for relief.
Venue Or Location
The Ohio counties listed below should file their bankruptcy at the U.S. Bankruptcy Court for the Southern District of Ohio, Eastern Division, located at Columbus: Athens, Belmont, Coshocton, Delaware, Fairfield, Fayette, Franklin, Gallia, Guernsey, Harrison, Hocking, Jackson, Jefferson, Knox, Licking, Logan, Madison, Meigs, Monroe, Morgan, Morrow, Muskingum, Noble, Perry, Pickaway, Pike, Ross, Union, Vinton, and Washington. I represent clients who live in these counties.
If you were the at fault driver in a motor vehicle accident and did not have automobile insurance, filing bankruptcy could allow you to discharge the debt from that accident and to terminate the BMV security suspension, thereby allowing you to get your license back and drive legally. Bankruptcy, however, will not discharge your financial obligations or damages to the other driver if it is proven that you were a drunk or impaired (drugged) driver.