Mentor Bankruptcy Attorneys
serving all northeast ohio
Bankruptcy may be a subject that you never want to discuss or even consider needing but it has been established under the laws of the United States to assist citizens’ needs and eliminate their debt. You may have ended up in dire straights for many reasons but there is no shame in using the laws established to help you get out of debt and have a fresh start at your financial health.
The United States Bankruptcy Code establishes two types of bankruptcy for people whose debts are primarily consumer-based. These are Chapter 7 and Chapter 13. The two types each have their benefits, and the determination of which chapter to use is best determined with the help of an attorney. The Moseman Law Office, LLC bankruptcy attorneys in Mentor and serving all northeast Ohio can help you find the solutions!
A personalized consultation with an attorney will determine which chapter of bankruptcy will best solve your financial problems.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is what is called a “liquidation” bankruptcy. This is the most commonly filed chapter of bankruptcy, and it can completely eliminate your obligation on nearly all of your debts.
However, if you have assets that are not exempt under the exemption laws of the State of Ohio, you may have to “buy” them back from the Court or surrender them to your creditors.
When one avails themselves of a Chapter 7 Bankruptcy, all debts except some taxes, student loans, and spousal/child support, are eliminated. Your medical bills, credit card, personal loans, payday loans, liability on repossessed and/or foreclosed upon property are all eliminated. When filing, you must list all assets and all debts even if you want to keep the item that the debt secures. Though the debts are listed, you can keep the asset, such as your house or car, if you continue to make the payments. If you choose not to continue to make the payments, the asset will be repossessed or foreclosed upon, and you will lose the asset but will no longer have any financial liability for the debt. It is based on the difference between the promise to pay – which is discharged – and the security interest the lender took in a particular asset.
Is a Chapter 7 Bankruptcy Best for Your Situation?
There are many considerations when determining if a chapter 7 Bankruptcy is right for you and your family. Some of these considerations include any assets with non-exempt equity, household income and expenses, and the type of relief needed. The Bankruptcy Code establishes a maximum income per household size that can be maintained and have the filer still qualify for a chapter 7 Bankruptcy. This maximum income is based upon the gross income of all those who contributed to the household income for the past six calendar months. It usually consists of only the income of the filing couple but if there are other members of the household who contribute – like a working child living at home or an elderly relative that contributes a portion of their income to the household expenses – then those contributions are counted toward the gross income of the household. There are exceptions to income that can be considered when determining the qualification for a chapter 7, and the primary exemption is Social Security income because it is not considered when filing for a chapter 7 Bankruptcy.
If you have a home or a vehicle that has non-exempt equity, that presents a restriction for filing a chapter 7 Bankruptcy. The State of Ohio has a list established in the Ohio Revised Code of values of assets that are always exempt from creditors of any kind, which includes creditors in a bankruptcy filing. Consider a vehicle used for daily transportation – only $3,725.00 per owner on the title of the value of the vehicle is protected from any creditor. For example, if you have a vehicle that is worth $5,000.00, and only one person is on the title, and there is no loan on the vehicle, you have $1,275.00 of unprotected equity in the vehicle. That means that to obtain a discharge in a chapter 7 Bankruptcy, the filer would have to either pay into the Bankruptcy court the sum of the non-exempt equity or $1,275.00, surrender the vehicle and receive a check for the exemption amount of $3,725.00, or file a chapter 13 Bankruptcy and pay the non-exempt equity to their creditors over up to a five-year period. There are similar limitations on the equity in other assets like homes, jewelry, bank accounts, and cash. There are also restrictions on the disposal or transfer of the assets up to ten years prior to the filing of the bankruptcy. While bankruptcy may seem like a straightforward process, navigating a filing without an attorney can leave you denied a discharge and responsible for your debts indefinitely.
Chapter 13 Bankruptcy
A filing under chapter 13 of the Bankruptcy Code comes with a different set of benefits and regulations. Chapter 13 is commonly referred to as a restructuring of debt. It is similar to a court-ordered credit counseling program. Chapter 13 also starts with a gross income-based analysis. It is presumed under the Bankruptcy Code that if the household gross income for its size exceeds the amount to qualify for a Chapter 7 filing that the filer is abusing the Bankruptcy laws if a Chapter 13 is not filed.
The next analysis is if there is a non-exempt asset that could be protected by filing a Chapter 13 versus a Chapter 7 Bankruptcy. Further consideration needs to be given to the continued anticipated gross income of the household. If it is determined to be consistent, Chapter 13 should be filed. If there will be an anticipated dip in gross household income, then a delay in filing may allow for a chapter 7 Bankruptcy to be filed.
Is a Chapter 13 Bankruptcy Best for Your Situation?
A Chapter 13 Bankruptcy allows for some reduction in debt and some ways to pay back non-dischargeable debt not available in a Chapter 7 Bankruptcy filing. For example, if a potential bankruptcy filer is behind on a mortgage or vehicle payment, then a chapter 13 may be helpful. The Chapter 13 filing allows the filer to continue to pay the monthly payment on the secured debt and pay the arrearages through the plan. This allows the filer to stop or avoid a foreclosure or repossession action and keep the asset.
There are also provisions in the Bankruptcy Code for a Chapter 13 filing that allows a filer to remove certain mortgages if they are wholly unsecured by the value of the real property. A chapter 13 filer may also be able to pay only the actual value of a secured vehicle instead of the whole amount of the loan. There are restrictions that relate to when the vehicle was purchased compared to the filing date. A Chapter 13 filer will be able to protect the non-exempt equity in an asset by paying the value of that non-exempt equity into the Court to be paid to their creditors. This means that the filer can retain the asset and pay the non-exempt value over time instead of all at once or risk losing the asset to the Court.
A Chapter 13 filing involves a Plan that can last up to five years. This gives the filer time to pay back all or a portion of their debt, maintain their assets, and get relief from harassing phone calls and lawsuits. The downside of a Chapter 13 filing is that the filer is subject to the rules and regulations of the Court for up to five years. During that time, a filer is not allowed to obtain new credit for any reason in excess of $500.00 without court permission. The filer is subject to regular reports of income increases that can increase the amount that is paid into the Plan for disbursements to the creditors. Evaluation as to the best Chapter of bankruptcy to file and when to do so is best discussed with an attorney.
Contact the Experienced Mentor Bankruptcy Lawyers at Moseman Law Office, LLC
Bankruptcy laws are complicated, and we highly recommend the assistance of an experienced, knowledgeable attorney as you go through this process. At Moseman Law Office, LLC we will not only handle the paperwork for you, but we will make sure that you understand the process and options in order to make the best choice for your situation. Contact us today and let us answer your bankruptcy questions.