Our Clients Ask Us: Filing For Bankruptcy

Q: I am considering filing for bankruptcy. What are my options?

Answer: Before making a decision about whether to seek bankruptcy protection, you should consult a qualified bankruptcy lawyer. As an individual you are eligible to file for bankruptcy under Chapter 7, Chapter 11, or Chapter 13 of the Bankruptcy Code. As a business you are eligible to file for Chapter 11 bankruptcy.

Chapter 7

This type of bankruptcy is referred to as liquidation, or a “fresh start” bankruptcy. Here, a trustee may liquidate your non-exempt assets to pay all or a portion of your debts. State law protects you from having certain property taken. This property is exempt from liquidation during bankruptcy, and may include equity in a home, a vehicle, furniture, or clothing. When estimating the amount of money that can be made from selling a particular non-exempt item, the trustee will subtract the

item’s exemption amount from it’s fair market value. The trustee will also subtract what you owe for any liens or mortgages that may be on the item. The trustee must also deduct any fees and expenses paid to professionals hired to assist in the liquidation. The trustee will only liquidate assets that will net a profit to pay your creditors. Through this liquidation process, most debts not paid will be discharged.

Chapter 13

This type bankruptcy is an alternative to Chapter 7 bankruptcy that will allow you to keep your property. If you earn more than the median family income before filing bankruptcy, and can repay at least $6,000 of your debt over five years, you are no longer eligible for relief under Chapter 7. Currently the median family income guidelines for Ohio are as follows: Family of One: $41,724; Family of Two: $52,030; Family of Three: $61,552; Family of Four: $73,040.

In this type of bankruptcy you must pay a portion or all of your debt back.

If you plan to file this type of bankruptcy you must be able to repay your creditors over time. You will be required to submit a plan detailing how all of your debts will be paid from your disposable monthly income over a period of time up to five years.

The plan will be monitored by a Chapter 13 trustee and supervised by the bankruptcy court. Upon the successful conclusion of all your payments under the plan, the bankruptcy court will enter a discharge order.

Chapter 11

This type of bankruptcy is a reorganization typically used by corporations or businesses, or individuals whose debts exceed the Chapter 13 debt limits. In a Chapter 11 reorganization, as in a Chapter 13 reorganization, you, the business debtor, keeps business assets and must pay creditors with future earnings according to a reorganization plan.

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