Filing Bankruptcy in Ohio: Process, Laws and Exemptions

Filing for bankruptcy in Ohio is more challenging than in other states, as Ohio provides fewer exemptions for personal property and homes.  As a consumer, you can file for bankruptcy in Ohio under either:

Chapter 7

Known as “Straight Bankruptcy” to wipe out all debts (with certain exceptions) and get an immediate fresh start.  Chapter 7 is a form of debt relief by which you may eliminate most forms of unsecured debt such as credit cards, medical bills and personal loans.  In most cases, you can keep your home, car and other personal belongings.

Chapter 13

Known as “Wage Earner Bankruptcy” is a debt repayment plan through which you consolidate your debts over a three-to-five year period.  The creditors cannot collect from you during the term of the plan.

Choosing a Type of Bankruptcy

By filing Chapter 7, the court appoints a trustee to sell off the assets and distribute the cash among the creditors, however in reality; most people filing for chapter 7 will keep all of their property. Proceedings under Chapter 13 involve the borrower proposing a plan for repaying a portion of the debt in installments from the borrower’s income.

If you choose to file under Chapter 7 bankruptcy, you must pass a “means test”.  This test was designed to limit the use of Chapter 7 to show who truly cannot pay their debts.  It does this by deducting specific monthly expenses from your “currently monthly income” (average income during the six months prior to filing for bankruptcy) to arrive at your monthly “disposable income”.  The higher your disposable income, the more likely you won’t be allowed to file for Chapter 7 bankruptcy.

Chapter 13 is appropriate for people who have fallen behind on secured loans (such as cars or houses) and need to catch up before repossession or foreclosure.

What to Expect

Filing for bankruptcy in Ohio does not cancel all of your debts.  You may still be required to pay the following:

• Alimony and child support
• Most recent back taxes
• Student Loans
• Recent large purchases of more than $550 for luxury goods bought within 90 days of filing
• Fines owed to state or federal government agencies
• Debts accrued as a result of fraudulent activity
• Cash advances of $825 within 70 days of filing

The Bankruptcy Process

Bankruptcy is initiated by filing a Voluntary Petition with the Clerk of the United States Bankruptcy Court.  Immediately upon filing, the debtor is protected by the “Automatic Stay”.  This stay prohibits creditors from doing the following:

• Making demand for payment
• Not proceeding with any pending lawsuits
• Cannot continue with wage garnishments, foreclosures or repossessions

A hearing (Meeting of the Creditors) is scheduled between 20 and 40 days after the filing.  This is conducted by the Trustee and is an opportunity for creditors and Trustee to examine the Debtor under oath. 

Property Exemptions

The bankruptcy code allows individuals who file for bankruptcy to claim certain property as exempt property.  States can either use the exemptions in the bankruptcy code, or they can “opt out” and use state law exemptions.  Ohio uses its own exemptions for which you can claim the following:

• $20, 200 in equity in your home
• $3,225 in equity in your motor vehicle
• $525 per item in any household goods up to a total of $10,775
• $2,025 in items you need for your job (tool, books, etc.)
• $1,075 in any property, plus part of the unused exemption in your home

In determining whether property is exempt, you must keep a few things in mind.  The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed.

If creditors are harassing you, it may be in y our best interest to speak with an attorney to help you determine if filing for bankruptcy is your best option.  An experienced lawyer will understand all of the Ohio bankruptcy laws and assist you in understanding what is in your best interest.