Chapter 7 bankruptcy: The Basics
Whether you’re filing bankruptcy in Ohio or another part of the country, the basics of chapter 7 bankruptcy are very similar. In exchange for the forgiveness of the vast majority of your debts, including the discharge of all of your unsecured debts, you agree to put your assets temporarily under the control of the bankruptcy court. Your property Becomes part of a “bankruptcy estate” and is divided into two basic piles: exempt and nonexempt. The exempt property you keep, the nonexempt property is subject to sale by the bankruptcy trustee to satisfy some of the claims of your creditors. If all of your property is exempt, you can discharge your debts without losing a single item of property. For a more thorough discussion of chapter 7 bankruptcy generally, click here.
With that out of the way, let’s delve into the details of the basics of filing bankruptcy in Ohio.
Filing for Bankruptcy in Ohio: a Little Different Than the Rest of the Country
Yes, the chapter 7 process is largely the same throughout the nation, but no two bankruptcy cases are exactly alike. Although the bankruptcy code is organized under federal law and applies in similar fashion throughout the country, each state has its own laws that govern local bankruptcy cases. The Ohio legislature has enacted laws, known as exemptions, which allow debtors filing for bankruptcy in the Buckeye state to protect assets while discharging their debts. Federal bankruptcy exemptions are not available in Ohio. Ohio is one of a handful of states where the legislature has passed “bankruptcy only” exemptions. This means that the exemptions can only be utilized in a bankruptcy case, not against a judgment creditor in a state collection action. Take note: courts are split on whether “bankruptcy only” exemption regimes are constitutional, be sure to consult with a local bankruptcy attorney to confirm exactly how the laws will apply to your case.
The Ohio Homestead and Automobile Exemptions: Keeping a Roof Over Your Head and a Means to Get to Work
The Ohio Homestead exemption allows debtors to protect up to $21,625 in real or personal property that they use as a residence. Married couples filing jointly can double the exemption. When determining if your residence is protected by the Ohio Homestead exemption, it is important to remember that the law applies to your primary residence only, investment property is not protected. Additionally, homestead exemptions are concerned with equity and not debt. You could have a home in Cleveland worth $500,000, but if you are underwater with the mortgage balance of $600,000, there is no equity and therefore nothing for the bankruptcy trustee to come after in the event you file for Chapter 7 protection.
In addition to protection for the Homestead, Ohio law also allows for exemption of a car up to $3,450 of equity. again, this law allows for protection of a car greater than $3450 in value. The focus for exemption purposes is on the equity in the car, not on the blue book value. For example, you could own a car worth $10,000 with a $7000 loan. In this case, the car would be exempt under Ohio law because there is only $3000 of equity. By contrast, if you owned the car out right, you would have nonexempt equity that the trustee would likely come after. For a complete list of current Ohio exemptions, visit www.legalconsumer.com.
Will I Lose All My Property if I File for Bankruptcy in Ohio?
This will be a function of the value of your property, but generally speaking, no you will not. As the above discussion of Ohio bankruptcy exemptions illustrates, state law will protect most, if not all, of your property. One of the biggest misconceptions about the bankruptcy process is that you will lose all of your property if you file. To the contrary, most consumers find that available exemptions are sufficient to allow them to retain their assets. Let’s use real estate as an example. Ohio, like the rest of the country has been hard hit by the recession and has seen a steep decline in property values. For this reason, it is relatively rare to find homeowners with large amounts of home equity. With property values currently down, many Ohio debtors have the opportunity to seek bankruptcy protection while keeping their family homes. If you are the exception to the rule, and own a home with considerable equity that exceeds the $21,625 exemption, you may want to reconsider filing for bankruptcy as your home would be placed into the nonexempt property pile upon filing.It is important to keep in mind that while Chapter 7 bankruptcy does sometimes involve the liquidation of assets, it is not the desire of the bankruptcy trustee to sell your property. To the contrary, marketing homes and real estate for sale takes quite a bit of time, effort and money. In most cases, the trustee would rather negotiate a cash settlement then actually go through with selling property. If you have equity in property that only slightly exceeds the Ohio exemption limits, you may be able to negotiate a cash payment in lieu of an auction. This is something that is best left to your attorney to negotiate.
What about my retirement?
There are provisions of the Ohio bankruptcy exemptions that apply to and protect pensions. In addition, federal non-bankruptcy law has provisions that make most retirement accounts such as 401(k)s and IRAs exempt from the claims of creditors and the bankruptcy trustee. For the vast majority of consumers, their retirements are not as risk when they file bankruptcy. To confirm that your retirement is protected, consult an attorney.
How Much Will the Attorneys Fees Cost?
Attorneys fees in bankruptcy vary by region of the country. And large cities the cost of filing cases higher, and rural areas where overhead is lower, the fees are more reasonable. As a general rule, the cost of chapter 7 bankruptcy in Ohio will usually range between $900 and $1500. Keep in mind though that this is just a ballpark figure, the cost of bankruptcy will vary by complexity of the case. In addition, there is a $306 filing fee to proceed with chapter 7 however, in cases of severe financial hardship debtors can ask that the fee be waived or paid in installments. Similarly, bankruptcy attorneys are used to helping families who find themselves struggling with that and most firms offer some type of payment plan so that their clients can afford to pay their fee.
Russ Cope, Dayton Bankruptcy Lawyer