If you are considering filing for Chapter 7 or Chapter 13 bankruptcy, you are likely wondering what will happen to your assets. Whichever bankruptcy option you ultimately decide to pursue, you will want to know what exemptions are available to protect your assets. Exemptions allow you to keep certain property by preventing it from becoming part of the bankruptcy estate.
To ensure that you are taking full advantage of bankruptcy exemptions and protecting as many of your assets as possible, consult with an experienced Cleveland bankruptcy lawyer as soon as possible. At Luftman, Heck & Associates, our Cleveland bankruptcy attorneys can help you decide which debt relief option is right for you and explain which exemptions are applicable to your case.
Call us today at (216) 586-6600.
What Is a Bankruptcy Estate?
Bankruptcy is initiated by filing a petition in federal bankruptcy court. Individuals can file for under Chapter 7 (liquidation) or Chapter 13 (reorganization) of the U.S. Bankruptcy Code. Debtors have certain obligations when filing for bankruptcy including the submission of a financial inventory, which details their assets, debts, and any applicable exemptions.
Once the bankruptcy petition is filed, a bankruptcy estate is created and an automatic stay goes into effect to prevent creditors from trying to collect debts until the bankruptcy proceedings have concluded. The bankruptcy estate is a separate legal entity and is managed by a trustee. All of the assets you own at the time of filing will become part of the bankruptcy estate, with the exception of exempt property.
How Is a Bankruptcy Estate Administered?
In both Chapter 7 and Chapter 13 bankruptcies, a trustee is appointed to administer the non-exempt property of the bankruptcy estate. The trustee’s role and duties differ depending on the type of bankruptcy and the unique circumstances of the case.
In Chapter 7 bankruptcy cases, the trustee’s role is to sell off non-exempt property (known as liquidation) and distribute the proceeds to pay off your creditors. In Chapter 13 bankruptcy cases, debtors must propose a debt management plan, which allows them to keep certain property (e.g. house, car) while they make payments from current income. The trustee is responsible for administering payments and monitoring the debtor’s performance under the repayment plan.
What Kinds of Exemptions are Available in Ohio Bankruptcy Cases?
Under Ohio bankruptcy law, exemptions allow people to protect certain property from being made available to creditors. The policy behind exemptions is that debtors need to retain a certain amount of their assets so that they can emerge from bankruptcy with a fresh financial start.
Exemptions have an important function in both Chapter 7 and Chapter 13 bankruptcies by protecting either the entire value of the asset or up to a certain amount. Exemptions allow you to keep certain property in Chapter 7 bankruptcy and determine how much you must repay in Chapter 13 bankruptcy.
Ohio has opted-out of the federal exemption system, which means that only state law exemptions are available in Ohio bankruptcy cases. Below are some of the most commonly utilized bankruptcy exemptions in Ohio:
- Homestead (personal residence) – Up to $136,925
- Motor vehicle – Up to $3,775
- Cash-on-hand – Up to $475
- Household goods – Up to $600 per individual item, total of $12,625
- Retirement plans (e.g. IRAs, 401(k)s)
- Jewelry – Up to $1,600
- Life insurance policies in which your spouse or children are beneficiaries
- Workers’ compensation benefits
For exemptions, the value of the property is not what you paid for it, but what is currently worth.
How Luftman, Heck & Associates Can Help
Filing for bankruptcy is a serious decision that will have many implications for you and your family. When it comes to your financial well-being, it is important to understand not only which type of bankruptcy is appropriate, but how your how your hard-earned assets will be affected. The best way to ensure that you are making the right choices and avoiding costly mistakes is to work with a knowledgeable bankruptcy lawyer.
The Cleveland bankruptcy lawyers at Luftman, Heck & Associates understand the financial pressures you are under and are ready to assist you today. We have helped countless individuals obtain the debt relief they need and have successfully handled hundreds of bankruptcy cases throughout Northern Ohio.