Q&A with a Columbus, Ohio Bankruptcy Lawyer
Friedman Law Offices offers representation in Chapter 7 bankruptcy cases throughout the greater Columbus area. If you struggling to pay your bills, a Chapter 7 may give you the fresh start that you are seeking. Call today for a free consultation with a Columbus, Ohio Bankruptcy lawyer.
What is a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy is a legal procedure where the debtor turns over their non-exempt property to the bankruptcy trustee so that it can be liquidated. The proceeds from the liquidation are then used to pay creditors. However, in the vast majority of cases the debtor does not have any non-exempt assets to turn over for liquidation – this is referred to as a “no asset” case. In a “no asset” case the debtor does not have to turn over any property to the bankruptcy court and all of the dischargeable debts are simply wiped away at the conclusion of the bankruptcy case.
What are the exempt assets that do not have to be turned over to the bankruptcy trustee?
The law is structured in such a way as to generally allow debtors to retain the property that is most essential to day to day life. This Ohio exemption statue allows debtors to keep the following property:
$425.00 – cash on hand
$5,000.00 – death benefits
$21,625.00 – homestead exemption
$1,450.00 – jewelry
$3,450.00 – one motor vehicle
$21,625.00 – personal injury award
$2,175.00 – tools of trade
$11,525.00 – wearing apparel, household furnishings, appliances, books, animals, musical instruments, firearms, hunting and fishing equipment and crops up to $525 per item.
$1,150.00 – wildcard personal property
Ohio law also allows debtors to retain their pensions, burial plots, alimony and child support, crime reparations, disability assistance, group life insurance, KEOGH, unemployment benefits, workers’ compensation and wrongful death awards.
Determining whether property is exempt or non-exempt can be complicated and should be done with the assistance of a qualified Columbus, Ohio bankruptcy lawyer.
Does everyone qualify for a Chapter 7 bankruptcy?
No. Chapter 7 bankruptcy is only available to those who satisfy the “means test.” Chapter 7 is only available to those people whose incomes fall below a specific level. It is very important to review your income and budget with a qualified Columbus, Ohio bankruptcy lawyer to see if you qualify.
Do all debts get discharged in a Chapter 7 bankruptcy?
No. A Chapter 7 bankruptcy cannot generally discharge the following types of debts: spousal support, child support, fraudulent debts, student loans, certain types of taxes, debts resulting from driving while intoxicated, court fees, court-imposed fines, debts from fraud, embezzlement, larceny, certain debts related to divorce settlements and penalties and debts that the debtor did not disclose in the bankruptcy pleadings.
Are there exceptions where Chapter 7 can discharge student loans?
Yes. There are certain specific situations where the bankruptcy court will discharge student loans. However, this is a very rare exception and is only used where the debtor can show that payment of the debt would constitute and undue hardship. To show an undue hardship a debtor would need to prove the following facts: (1) that they would be unable to maintain a minimal standard of living if they were required to pay the student loan; (2) that whatever situation is causing the debtor financial strain (such as a medical condition) is likely to persist for a significant period of the repayment period; and (3) that the debtor has made a good faith effort to repay the debt.
If you feel that you might qualify for the discharge of your student loans you should consult with a qualified Columbus, Ohio bankruptcy lawyer.
Can I keep my car in a Chapter 7 bankruptcy?
Yes. A debtor has the option to sign a reaffirmation agreement allowing the car loan to survive the bankruptcy. Reaffirmation usually requires the debtor to accept the terms of the original loan agreement. If the outstanding loan balance greatly exceeds the value of the vehicle it may not be a wise decision to reaffirm the loan.
Another possible option to retain your car through a Chapter 7 bankruptcy is through redemption. Redemption allows the debtor to pay the creditor the fair market value of the asset opposed to the outstanding loan balance. With redemption it may be possible to retain their car and eliminate a sizable portion of the outstanding debt associated with the purchase. The primary problem with redemption is that the debtor generally has to come up with a lump sum payment to purchase the vehicle.
If a debtor decides not to keep their vehicle than it will be returned to the creditor who will sell it and apply the proceeds to the loan balance. Any deficiency remaining after the sale of the vehicle will be discharged (wiped away) at the conclusion of the bankruptcy case.
Most people find that at the conclusion of their bankruptcy case they are bombarded with offers to purchase a new vehicle. There is an entire industry that focuses solely on selling cars to individuals who have recently gotten a Chapter 7 bankruptcy discharge. As a general matter the interest rates will be higher but it can be an effective way to begin building credit again after you bankruptcy. The important thing is to be very careful to keep your expenses at a manageable level to avoid future problems.
Call today to schedule a free consultation with a Columbus, Ohio Bankruptcy Lawyer.