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U.S. Bankruptcy Laws

The purpose of bankruptcy laws is to help individuals in debt receive a fresh start by either liquidating their assets or creating a repayment plan. Bankruptcy laws also serve to help struggling businesses.

Under federal law, you are entitled the right to file for bankruptcy. All bankruptcy cases are handled in federal court.

Under the bankruptcy laws prior to 2005, it was much easier for anyone to file for Chapter 7. In late 2005, it became more difficult to file for personal bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act was created which established that only those individuals who made less than the average income in Ohio could automatically file for Chapter 7 bankruptcy. If an individual’s income is greater than the Ohio average and they pass the means test, they still may be able to file for Chapter 7. If your income does not pass the means test, you will have to file for Chapter 13 bankruptcy.

In addition to the means test, the bankruptcy laws established in 2005 also made it mandatory to take a credit counseling course within six months prior to filing for bankruptcy. After bankruptcy is filed, attending a financial management class is also required. Creditors have the right to retain copies of your most recent tax returns (although they rarely, if ever do). Any pay stubs that are received in the 60 days before bankruptcy is filed must be filed with the court.

Chapter 7 bankruptcy functions to eliminate most if not all of your debt and give you a fresh start financially. You could have the trustee liquidate or sell your property in order to pay off debts to creditors, but this does not happen very often.

In Chapter 13 bankruptcy, you will be able to keep your property, as you will have a repayment plan to pay back some of your debt over three to five years. Chapter 13 is typically better suited for individuals who have enough income to meet basic financial obligations, but need a payment plan to repay debt.

Generally in Ohio, the following are examples of bankruptcy exemptions:

  • Real Estate – The protection of up to $125,000 in real property.
  • Automobiles – The protection of up to $3,450 in one motor vehicle.
  • Cash – $425 in money on hand or in the bank.
  • All IRAs, 401ks, and other retirement plans.
  • Personal injury recoveries; wrongful death recoveries; certain tax refunds.

Questions about Bankruptcy Filing? Call Today.

Whether you’re deep in debt or struggling to stay up with bills, there’s a solution to your financial situation. If you have questions about filing bankruptcy, our Cleveland bankruptcy lawyers at LHA have the knowledge and experience to fight for your best interest. Contact Ohio bankruptcy attorney Paul Kuzmickas today to discuss your options at or email us at advice@clevelandbankruptcyattorney.com.
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