When a monetary crisis strikes and you just can’t find a why to pay your bills, bankruptcy may seem like the only way to make a fresh start. But because of the stigma many associate with bankruptcy, you may be wondering, “Is bankruptcy right for me?”
The answer is, it depends on a myriad of factors, as well as your unique circumstances. Bankruptcy is something to consider carefully before moving forward with it. A Middletown OH bankruptcy attorney can advise you of your options and help you make a decision that best suits your needs. In this article, we explain the different types of bankruptcy and their eligibility requirements. To learn more, contact Andrade Law Office LLC today.
When Is Bankruptcy NOT the Best Option?
Bankruptcy may not be the best option if your debts are below a certain level or your creditors will work with you to settle your debts with them. It may also not be an option if you do not pass the means test for Chapter 7 bankruptcy, although you may qualify for Chapter 13. For cases filed after May 1, 2018, you have to make less than the Ohio individual median income for the past six months (the annual median is $48,596). If you fail that test, you’ll have to prove you don’t have enough disposable income to pay your bills after your personal needs are met.
Which Kind of Bankruptcy Should I Choose?
Two kinds of bankruptcy apply to individuals: Chapter 7 and Chapter 13.
Choose Chapter 7 if you:
- Can protect all your personal property with exemptions.
- Pass the means test.
- Have debt that can be discharged through bankruptcy.
Choose Chapter 13 if you:
- Don’t qualify for Chapter 7.
- Are able to repay most of your unsecured debt.
- Have multiple mortgages.
- Want to keep from losing your house or car.
Does Bankruptcy Clear My Debt?
Bankruptcy discharges almost all debt, especially unsecured debt (like credit cards), medical bills, and personal loans. However, priority obligations can’t be discharged. These may include (but are not limited to):
- Child support.
- Recent tax debts.
- Student loans (except in cases of extreme hardship).
Even if some of your debt is non-dischargeable, you can still arrange for 3-5 years of structured repayments via Chapter 13. This may be the best way to save your house if it’d gone into foreclosure, since foreclosure issues a temporary “automatic stay” of collection activities. The stay buys you time to catch up on your mortgage payment, and you may be able to discharge secondary and tertiary mortgages through a process called lien stripping.
Any bankruptcy’s automatic stay helps by providing a little breathing space, but be aware that student loan lenders, the IRS, and child support/alimony collectors are immune to the stay.
Protecting Your Property
How much property will you be able to keep by filing bankruptcy? That depends. But you won’t lose everything. Some property will be exempt, and some will have a level of “exempt equity” depending on the amount of ownership interest you have in the property. If you go Chapter 7 in Ohio, you may be able to keep most of your property. Ohio exemptions include:
- Your home, up to a value of $136,925 (tenancy required).
- You burial plot.
- A car up to $3,775 in value.
- Cash, bank, and security deposits, and monies due within the next three months to a total of $475.
- Animals, books, firearms, musical instruments, crops, and household items (including furniture and appliances) up to $600 each, and jewelry up to $1,600, to a total of $12,625.
- Health aids (canes, wheelchairs, oxygen tanks).
- Wrongful death rewards if you depended on the victim for support.
- Personal injury rewards up to $27,300.
- Tuition credits or payments.
- 75% of your personal income or 30 times the federal minimum wage, whichever is greater.
- Most pensions, including Social Security.
- Personal benefits like earned income or child tax credits, disability, or worker’s comp.
- Tools of your trade up to $2,400 in value.
- Alimony and child support received.
- Business partnership property.
- 529 savings plans.
- A $1,250 “wildcard” for any property.
With some exceptions, or unless the court says otherwise, your Chapter 7 trustee can seize anything else and sell it to pay your creditors.
Chapter 13 bankruptcy lets you keep all your property under a structured repayment schedule, but you’ll have to pay back unsecured debt at least equal to your non-exempt property.
Is Bankruptcy Right For Me? Ask an Ohio Bankruptcy Attorney
Declaring bankruptcy can be one of the most difficult and significant decisions of your life, so it’s not one taken lightly. It’s important to weigh all of your options, as well as to determine which chapter makes the most sense for your situation. An Ohio bankruptcy attorney can help you make an informed decision. To find out if bankruptcy is right for you, contact Andrade Law Office LLC today.