Do you have overwhelming debt? Do you feel like you can’t get ahead on your bills, no matter how hard you try? If you answered “yes” to either of these questions, read on to learn more and discover answers to frequently asked questions about Chapter 7 bankruptcy. The answers are meant to address your most common concerns and to help you decide if filing for this type of bankruptcy might be an option for you, but they are no substitute for sitting down with a Cleveland Chapter 7 bankruptcy lawyer to discuss your situation.
What is Chapter 7 Bankruptcy?
In a Chapter 7 bankruptcy, a debtor will file a petition with the local federal court for a small fee, and a trustee will be appointed to review all the debtor’s sources of income, assets, expenses, and debts. The trustee will liquidate certain items to pay back the debtor’s creditors. Such items might include a house, car, jewelry, furniture, appliances, tools, and other personal possessions.
Who Qualifies for Chapter 7 Bankruptcy?
To be eligible for Chapter 7 bankruptcy in Ohio, you need to be making less than the median income for a household of your size. According to the Census Bureau’s latest data, for Ohio, that would be:
- A one-earner family making less than $48,596 per year
- A two-person family making less than $60,834 per year
- A three-person family making less than $73,529 per year
- A four-person family making less than $85,294 per year
In order to qualify for this type of bankruptcy, you must pass a “means test,” which is discussed in more detail below.
What is the Means Test?
A means test is a way to ensure those with high incomes aren’t filing for Chapter 7 bankruptcies. First, you must calculate your current monthly income and expenses on Official Form 122A-1. It will ask about your:
- Gross wages, salary, tips
- Bonuses, overtime, commissions
- Alimony payments
- Regularly paid household expenses, including child support
- Income from operating a business or farm
- Income from a rental property
- Interest, dividend, or royalties
- Unemployment compensation
- Income from a pension or retirement accounts
- Any other income
The trustee will examine this number, and assess it against national allowances for food, housekeeping, clothing, personal care items, and miscellaneous items, as well as out-of-pocket health costs. They will also apply Cuyahoga County’s standards for housing, utilities, and transportation expenses. If your leftover monthly income is less than $7,700, you pass the means test. If your remaining income is over $12,850, you do not qualify.
A person can only file Chapter 7 bankruptcy every eight years. This filing will remain on your credit report for 10 years, and have a negative impact on your credit score.
What Property is Exempt?
Ohio offers a “wildcard” exemption for $1,250 for any property, and a $136,925 homestead exemption.
In response to probably the most common question people ask us about Chapter 7, the good news is you may be able to keep your home when you declare bankruptcy.
Which Debts Can’t Be Erased?
At any time during the process, your creditors can challenge your request to discharge debts, and the judge will decide whether or not to listen to them. In general, the following debts are not dischargeable:
- Student loans (unless they constitute an “undue hardship” to you)
- Income taxes
- Alimony or child support
- Judgments against you for personal injury or death caused by DUI
- Traffic tickets or restitution for other crimes
- Debts incurred through fraud
For Answers to More Bankruptcy FAQs, Contact Us Today
If you’re considering filing for bankruptcy in Cleveland, you should hire an attorney who knows the area’s courts and is familiar with the relevant law surrounding your case. Luftman, Heck & Associates regularly handles Chapter 7 and Chapter 13 filings, and we are prepared to help you. We can compile all the forms and required data, and make a very complicated process easier for you.