What is bankruptcy?
There are two chapters generally available to help people deal with their creditors:
Chapter 7 Bankruptcy involves a liquidation of assets to repay creditors; most debt is then discharged. That’s the theory anyway; many people don’t lose any property. There is one hearing, the meeting of creditors, which you will be required to attend. At that hearing, a bankruptcy trustee will go through the filing, and will ask you questions.
Chapter 13 Bankruptcy is a reorganization of your debt. A payment plan, which is based on your budget, will be established to repay all or some of your debt. There is also a meeting of creditors that you must attend, plus an orientation session prior to that meeting.
How long does the bankruptcy process take?
Once it has been filed, a typical Chapter 7 bankruptcy lasts about 4 to 5 months. Chapter 13 bankruptcy can take up to five years to pay out.
Will I lose the things I own?
Each state decides what its residents can protect. If you file for Chapter 7 bankruptcy, you should be able to keep your assets as long as there is there is no excess equity. Keeping a house or vehicle in Chapter 7 can also depend on whether you are current on the payments.
If you file for Chapter 13 bankruptcy, you should be able to keep your property because it’s a repayment not a liquidation. Chapter 13 is intended for individuals who are able to afford basic monthly expenses, but are not able to stay current with all of their payments and bills. In a Chapter 13 bankruptcy, you hold on to your property by reorganizing your debt and paying it off over a three to five year period.
Will I be able to ever rebuild my credit?
Yes, many people move past bankruptcy and successfully rebuild their credit rating and financial standing. The key is to, going forward, pay all of your bills on time. You should also monitor your credit report to ensure it is correct.
How long will the bankruptcy be on my credit report?
Chapter 7 bankruptcy will remain on your credit report for 10 years from the filing date. Chapter 13 bankruptcy, and other bad credit information, will be shown for 7 years.
Qualifying for bankruptcy
Most people can qualify for bankruptcy, but not everyone with too much debt needs to file for it – so this is something we will discuss at your initial conference. Depending on your situation, you will probably qualify for either Chapter 7 or Chapter 13. A “means test”, based on your recent income, is one of the ways we make that determination.
The means test separates filers who earn either more or less than the average income in Ohio for a household of the same size. We will put together your average monthly household budget, and also do a mathematical calculation based upon an average of your last six months of income and expenses.
If you can afford to pay your monthly living expenses and still have money left over, there is a good chance you will qualify for Chapter 13 bankruptcy. Chapter 13 bankruptcy is not only for people who have higher incomes. If you are behind on payments to creditors and want to keep the property, or if you have assets you would lose if you file Chapter 7, then filing for Chapter 13 may be a good solution.
How do I get started, and what about legal fees and other costs?
At the initial appointment, which is free, we will discuss your financial situation including your income and expenses, and your debts (credit cards, medical bills, student loans, taxes, personal loans, mortgages and car loans – everyone you owe). We’ll talk about what Chapter 7 and Chapter 13 can do for you, given your situation, and also the anticipated costs involved for your particular case and how you can get that paid. If there are non-bankruptcy options for you to consider, we’ll go through those. We can also discuss the process from the getting-started appointment through the signing of the paperwork and the required court appearance, and what happens after that.
It is my intention to answer all of your questions throughout, because I want you to understand the bankruptcy option you choose to file, and to understand what is happening and why. You will not be hiring me to make your decisions, but rather to guide you through the process.
Because I am a solo practitioner, you will be dealing with me throughout, or with my assistant. You will not be shuttled off to a paralegal or a junior attorney.
What if someone owes me money, and filed bankruptcy?
I also represent people who are creditors in bankruptcy cases, so call and we can talk about what is involved.