Chapter 7 bankruptcy, often called “liquidation bankruptcy,” offers you a way to eliminate most of your debt and get a clean slate. In some cases, all debt may be forgiven or discharged.
What Is a Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy allows consumers to “liquidate,” or sell, nonexempt property and distribute proceeds to creditors. You might be able to keep your house or car. Chapter 7 bankruptcy discharges or eliminates most debt.
Declaring bankruptcy offers you an opportunity to correct and avoid past financial mistakes.
How Long Does Chapter 7 Bankruptcy Take?
Chapter 7 is generally faster than other types of bankruptcy. Once you identify all your creditors and your bankruptcy is approved, your debts are wiped out. Chapter 7 bankruptcy could take six to eight months when you work with an experienced debt relief attorney.
A Chapter 7 bankruptcy remains on your credit report for up to 10 years. Keep in mind, wiping your financial slate clean with bankruptcy may not be as detrimental as late payments, collections, and repossessions. In time, people who claim Chapter 7 bankruptcy can build a better credit rating.
Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy
Both Chapter 7 and Chapter 13 are types of consumer bankruptcies for individuals. However, there are some critical differences between the two.
Chapter 7 Bankruptcy Features
Chapter 7 bankruptcy typically takes less time and wipes out all your debt. You may have to sell or liquidate some of your assets to repay some of your creditors. Additionally, you must meet income requirements to qualify for Chapter 7.
Chapter 13 Bankruptcy Features
Chapter 13 bankruptcy involves a repayment plan that can take three to five years to complete. You must repay some or all your creditors before any of your debts can be eliminated. You must have enough stable income to make the payments and have less than the maximum debt limits – currently $394,725 in unsecured debt and $1,184,200 in secured debt for 2021.
How to File for Chapter 7 Bankruptcy in Ohio
You must take several steps to file for Chapter 7 bankruptcy and successfully discharge your debts.
Step 1: Gather Your Financial Documents
Your Chapter 7 bankruptcy lawyer gives you a list of the necessary financial documents. We recommend organizing your debts into folders or envelopes before you come to our office. You can make copies of your documents on your own or we can when you visit us.
Some documents you will need to provide include:
- Paycheck stubs for the last six months
- Information about additional income over the previous six months
- State and federal tax returns for the previous four years
- Bank statements for the last four months
- Bills showing account numbers and creditor addresses
- Vehicle titles
- Driver’s license
- Social security card
- Life insurance policy declaration pages
- Retirement account statements
- Lawsuits filed against you, including foreclosures and garnishments
- Divorce or dissolution agreement if your marriage ended in the last eight years
- Child support orders
- Spousal support orders
- Lawsuits or insurance claims involving you within the last four years
- Previous bankruptcy filing documents
- Real estate deeds
Step 2: Determine If You Qualify for Chapter 7 Bankruptcy through the Means Test
There are income limits for people seeking a Chapter 7 bankruptcy. You will need to qualify with low income, which is below the median income level for your state, or pass the Means Test.
The Means Test calculates your household income by assessing six months of gross income, the number of people in your household, and your expenses. Your annual gross income must be lower than the amount designated by the IRS standards, which change annually.
Step 3: Attend an Online Credit Counseling Course
Before filing for Chapter 7 bankruptcy in Ohio, you must attend an approved credit counseling course. You may participate in in-person, online, or by phone. If you are filing a joint bankruptcy with your spouse, they must also attend a credit counseling class.
Step 4: Complete & File Bankruptcy Forms
A Chapter 7 lawyer can provide the forms you need to complete, or you can find them online at the Ohio bankruptcy court website. Your attorney reviews the financial information you bring and ensures your forms are complete and accurate. Errors on your filing documents could delay a Chapter 7 bankruptcy.
Step 5: Pay a Chapter 7 Filing Fee
You must pay a court filing fee to file Chapter 7 bankruptcy. The filing fee for Chapter 7 in Ohio is currently $338.
Step 6: Send Documents to Your Assigned Trustee
The bankruptcy court assigns a trustee to your case. The bankruptcy trustee handles the administration of your case and might need specific information or documents. Make sure you meet all deadlines given by the court and your trustee.
Step 7: Attend a Bankruptcy Education Course
In this second bankruptcy education course, you will learn more about basic budgeting and financial management. The course is 60 to 90 minutes long and can be completed online, in person, or via phone. If you are married, your partner must take it too.
Step 8: Attend a Meeting of the Creditors (341 Meeting)
In addition to the other requirements, you must attend a court hearing known as a Meeting of the Creditors or a “341 Meeting.” Your bankruptcy attorney can attend this hearing with you. At this hearing, your trustee will ask you questions about your debts, assets, and income.
You will have to show your driver’s license and social security card. You may be required to submit additional documentation. This hearing is typically brief, and creditors rarely attend.
Step 9: Bankruptcy Finalization and Discharge of Debts
Once you submit all necessary documentation and attend all classes, your case will go to the bankruptcy judge. From there, your bankruptcy is finalized, and your debts are discharged. You will likely walk away debt-free with a clean slate.
What Property is Exempt from a Chapter 7 Bankruptcy?
In some states, you can choose whether you use state or federal exemption amounts. However, Ohio requires you to use state exemptions.
Ohio bankruptcy exemptions include a specific dollar amount that you may keep when you file bankruptcy. If you are married, then you may keep up to double the amount listed in the statute.
The values of these assets refer to “equity value.” Equity value is how much your property is worth if sold or liquidated, minus any liens. For example, if you own a home worth $150,000, but there is a $50,000 lien on it, the liquidation value is $100,000.
Exemptions Allowed for Chapter 7 Bankruptcy
Common exemptions as defined by Ohio Revised Code 2329.66 include:
- Homestead exemption – Up to $136,925 home equity value
- Motor vehicle exemption – Up to $4,000 in one vehicle
- Wildcard exemption – Up to $1,325 for any property of your choosing
- Cash – Up to $500 on hand or in deposit accounts
- Household goods – Up to $13,400 in furniture, appliances, etc.
- Jewelry – Up to $1,700 in equity total
- Personal injury award within 12 months of bankruptcy filing – Up to $25,175
- Tools of trade (implements, books, etc.) – Up to $2,550 in value
- Benevolent society death benefits – Up to $5,000
In addition to these specifical monetary amounts, Ohio allows certain exemptions with any value, including the following:
- One burial lot
- Spousal or child support
- Most retirement benefits
- 529 college savings plans
- Crime victim’s compensation received within 12 months before filing
- Disability payments
- Earned income credit and child tax credit
- Unemployment compensation
- Vocational rehabilitation benefits
- Workers’ compensation
- Life insurance
Chapter 7 Bankruptcy FAQ
Please contact our Chapter 7 bankruptcy lawyers at Luftman, Heck & Associates if you have additional questions.
Is There a Chapter 7 Bankruptcy Attorney Near Me?
Yes. Luftman, Heck & Associates serves clients throughout Ohio. We have offices conveniently located in Columbus, Cleveland, and Cincinnati. We can also discuss your case over the phone. Give us a call at (614) 224-1500 or use our online contact form to schedule an appointment to discuss your case.
Will Filing Bankruptcy Stop Collections, Foreclosure, and Repossessions?
Yes. When you initially file Chapter 7, it will immediately put a “stay,” or hold, on current debt collections. That means it will stop creditors from the following activities:
- Collections calls, emails, mailing
- Wage garnishment
- Home foreclosure
- Repossession of property, including car repossessions
- Bank account drafting
Your Chapter 7 bankruptcy lawyer will handle your creditors and correspond with any collections agencies who try to contact you. If they continue to call, give them your attorney’s contact information. Creditors may not continue to pursue payment after you file Chapter 7 bankruptcy.
Do I Need a Lawyer to File Bankruptcy in Ohio?
No. You are not required to use a lawyer to file bankruptcy. However, most people don’t have the experience or background to protect themselves during this process. Bankruptcy laws are complex, and there are penalties if you miss specific deadlines.
You will also have to communicate with creditors and their attorneys, as well as judges and court staff. You could save time, effort, and frustration if you work with a knowledgeable attorney.
What Can I Discharge in Chapter 7?
Chapter 7 bankruptcy will discharge most or all your unsecured debts. That includes credit cards, medical bills, and unsecured personal loans.
You will have to liquidate assets to repay secured debts. You may be able to keep some of your secured debts. Any secured debts that don’t require liquidation may be eligible for discharge.
Among the specific items that you cannot discharge:
- Student loans, unless you are completely disabled or suffer undue hardship
- Taxes, some exceptions for old debt
- Other items listed in the U.S. bankruptcy code
What Can I Do Instead of Filing Bankruptcy?
Bankruptcy isn’t a suitable choice for everyone. As a full-service consumer debt law firm, Luftman, Heck & Associates helps you make an informed decision about your financial situation.
Our caring attorneys:
- Review all your debt and explain your options.
- Contact your creditors to negotiate lower debt settlement offers.
- Connect you with resources for improved financial management in the future.
Let us help you make an educated decision.