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Written by
Attorney Mary Lou Burns
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Call 330-818-9300 to talk to our attorney about your financial situation. We're here for you.
There are two main types of bankruptcy you can file: Chapter 7 and Chapter 13.
Chapter 7 is the most common type of bankruptcy. In a Chapter 7 bankruptcy, all of your debts are discharged and you are not responsible for paying back any creditors except certain non-dischargeable debts. The debts usually discharged in a Chapter 7 bankruptcy include credit card debt, medical bills, payday loans, personal loans, utility bills, bounced checks (unless fraudulent), deficiency balances on vehicle repossessions, auto accident claims, business debts, rental agreements and past due rent, judgments on debt, social security overpayments and some older income taxes.
The most common non-dischargeable debts are:
- Student Loans, with limited exceptions
- Income taxes less than 3 years old
- Alimony and child support
- Court fines and criminal restitution
- Damage and personal injury resulting from driving while intoxicated or under the influence of drugs
- Debts obtained by fraud
Chapter 7 is the simplest and quickest way to rebuild your credit. You receive your discharge approximately 4 to 5 months after your bankruptcy is filed with the Court. It is the preferred route to go and most people can qualify for a Chapter 7 bankruptcy.
There are two things to be aware of with respect to a Chapter 7 bankruptcy:
1. In theory, you give up property in a Chapter 7 bankruptcy. From a practical standpoint, it generally does not occur because most people do not have enough value or equity in their property. Whatever value or equity there is in the property is normally protected by claiming exemptions available under the law. For example, on January 1, 2016, an individual could protect $132,900 of equity in his or her home. Few debtors have this much equity in their home. Therefore, assuming they are current in their payments, most debtors do not need to be concerned about losing their home in a Chapter 7 bankruptcy. The same typically holds true for a vehicle. Income tax refunds can be considered the most common type of property that is turned over in a Chapter 7 bankruptcy. The timing of the bankruptcy can be an important factor in protecting a person’s tax refund. In order to protect your tax refund in the bankruptcy, Mary Lou Burns takes the time to weigh this factor and discuss with you the best possible way to avoid having to turn over your tax refund in the bankruptcy.
2. In order to qualify for a Chapter 7 bankruptcy, the Debtor must meet certain income eligibility requirements. One of these is the Means Test. This involves comparing your annual income to the median income in Ohio for your household size. For purposes of the Means Test, your annual income is calculated by multiplying your most recent 6 months of income by 2. When your annual income exceeds the Median Income in Ohio for your household size, it is assumed to be an abuse to file a Chapter 7. We must then do further testing under the Means Test to determine if you qualify for a Chapter 7 bankruptcy. This process is more involved and time consuming, and factors in several variables. Attorney Mary Lou Burns takes the time to analyze the client’s situation and does her best to get her clients qualified for a Chapter 7 bankruptcy. Fortunately, many people can still qualify for a Chapter 7 bankruptcy, even if their annual income exceeds the Median Income for their household size. If you cannot qualify for a Chapter 7 bankruptcy, you may still get relief from your debts by filing a Chapter 13 bankruptcy.